Template-Type: ReDIF-Paper 1.0

Author-Name: Barbara Hanel
Author-X-Name-First: Barbara
Author-X-Name-Last: Hanel

Author-Name: Regina T. Riphahn
Author-X-Name-First: Regina T.
Author-X-Name-Last: Riphahn

Title: New Evidence on Financial Incentives and the Timing of Retirement

Abstract: We investigate the responsiveness of individual retirement decisions to changes in financial
incentives. The causal effect is identified based on the natural experiment generated by an
institutional reform. The results of a binary retirement model are robust to alternative model
specifications, to a competing risks framework with endogenous panel attrition, and to
alternative representations of unobserved individual-specific heterogeneity. We find strong
behavioral effects of changes in financial retirement incentives. A permanent reduction of
retirement benefits by 3.4 percent induces a decline in the age-specific annual retirement
probability by over 50 percent. The response to the reforms intensifies over time suggesting
that retirement behavior may be affected by social norms. The response to changes in
financial retirement benefits varies with educational background: those with low education
respond most strongly to an increase in the price of leisure.
Length:  37 pages
Creation-Date:  2009-07
File-URL: http://www.bgpe.de/texte/DP/076_hanel.pdf
File-Format: Application/pdf
File-Function: First version, 2009
Number: 076
Classification-JEL: J26, H55, J14
Keywords: retirement insurance, incentives, social security, labor force exit, natural experiment, Switzerland
Handle: RePEc:bav:wpaper:076_hanel