Rates of Return and Early Retirement Disincentives: Evidence from a German Pension Reform

Aufsätze referiert extern - Web of Science 2 / 2016

Holger Lüthen

In: German Economic Review 17 (2016), 2, S. 206-233

Abstract

To counteract the financial pressure emerging in aging societies, statutory pension schemes are undergoing fundamental reforms in many Western countries. Starting with cohort 1937, Germany introduced permanent pension deductions for early retirement. This study examines the profitability of pension contributions against the background of this reform for cohorts 1935–1945. Internal rates of return (IRR) are used to measure the profitability. For men, the IRR declines from 2.4% to 1.2% and for women from 5.2% to 3.7%. The results suggest that the majority of the trend, about 75–80%, is caused by increased pension contributions and not by the reform.

Holger Lüthen

Wissenschaftlicher Mitarbeiter in der Infrastruktureinrichtung Sozio-oekonomisches Panel



JEL-Classification: D02;D14;H55
Keywords: Pensions, reform, early retirement, disincentives, pay-as-you-go, rates of return, Germany
DOI:
http://dx.doi.org/10.1111/geer.12070