Cluster-Seminar Public Finances and Living Conditions

Losing a job after age 60 in Germany is virtually equivalent to the end of one’s working life. Roughly 25% of job exits after age 60 are involuntary with considerable variation along region, age, tenure and education. Considering this, I estimate a structural model of retirement timing in the presence of labor market frictions. A subsequent ex-ante policy analysis is meant to illustrate the likely consequences of shifting the regular retirement age to 67 (“Rente mit 67”) in terms of average retirement age. Scenarios without frictions provide an upper bound for the reaction potential of the work force and likely to overestimate the true effect.