The twentieth century has seen a phenomenal decline in mortality and an increase in productivity level. These two important events likely affect people's choices of schooling years and retirement age. We first show that in a standard life-cycle model, positive feedback exists between optimal schooling years and retirement age choices. We then evaluate the impact of a mortality or productivity shock on an endogenous variable (schooling years or retirement age) by decomposing it into the direct and indirect effects, where the indirect effect arises from feedback from the other endogenous variable. Finally, we extend the model by including the utility benefit of schooling and show that a negative correlation of schooling years and retirement age is possible. Apart from clarifying the apparently similar concepts of positive co-movement and positive feedback, our results have implications relevant to the economic demography literature.

We estimate how raising the statutory retirement age affects employment by considering the pension age reform in Estonia, that gradually raised the normal retirement age (NRA) for women from 58 to 61.5 and the early retirement age (ERA) from 56 to 59.5 during the period of 2001–2011. The analysis employs a difference-in-differences estimation strategy on register data covering women born between 1943 and 1952. The reform did have an impact on the employment rate of affected women, with an estimated increase of 4.1 percentage points associated with the rise in the NRA, and 3.4 percentage points with the rise in the ERA. These estimates are at the lower end of those found in previous studies for other countries, pointing to the role of contextual features such as lower replacement rates and fewer disincentives to work while drawing pensions.

We have designed and implemented an experimental module in the 2014 Health and Retirement Study to measure older persons' willingness to defer claiming of Social Security benefits. Under the current system’ status quo where delaying claiming boosts eventual benefits, we show that 46% of the respondents would delay claiming and work longer. If respondents were instead offered an actuarially fair lump sum payment instead of higher lifelong benefits, about 56% indicate they would delay claiming. Without a work requirement, the average amount needed to induce delayed claiming is only $60,400, while when part-time work is stipulated, the amount is slightly higher, $66,700. This small difference implies a low utility value of leisure foregone, of under 20% of average household income.

Increasing the minimum retirement age is a widespread option chosen by policy makers to reduce spending in financially constrained public pension systems. Yet, the effectiveness of such a reform strongly depends on the ability of individuals to postpone their withdrawal from the labor force. In this paper, we study the immediate impact of the 2010 reform of the French pension system by carrying out a short-term evaluation on the increase of the statutory eligibility age from 60 to 61. We use a differences-in-differences methodology, comparing the trajectories from work to retirement for succeeding generations facing a different statutory age. Using a detailed social security administrative database, we provide a global assessment of the effects of the reform, accounting for the potential substitution effects from old-age insurance toward unemployment, sickness or disability insurance schemes. Our findings suggest that despite a sizable effect on the employment rate, the reform also strongly increased unemployment and disability rates.

We study the combined effects of financial incentives and information provision on retirement behavior. To elicit preferences for retirement timing in the laboratory, we ask subjects to make retirement choices under different payoff schemes that introduce variation in financial incentives. Testing ceteris paribus conditions of the financial incentive alone shows a considerable delay of retirement once early retirement becomes financially less attractive. However, varying available information as another treatment parameter reveals considerable heterogeneity in the functioning of these incentives. Subjects who are explicitly informed about the expected pension wealth respond more strongly to financial incentives compared with those who only know their pension annuity. Being informed about a forward-looking measure of pension benefits makes the financial consequences of retirement choices more salient to the decision maker.

In times of decreasing mortality, one way to stabilise a PAYG pension system is to interrelate the retirement age to the anticipated average lifespan. This paper investigates two approaches for Germany: one is to keep the average retirement duration constant, the other to define a constant share of the total lifespan for the retirement period. Our simulation model uses a Leslie matrix population projection, a Solow-Swan growth model and a detailed calculation of the German pension insurance budget. Our results show quite a significant impact on the insurance level and a rather small effect on the contribution rate, which is characteristic of a Bismarckian system.

Challenges raised by aging (increasing longevity) have prompted policy debates featuring policy proposals justified by reference to some notion of intergenerational equity. However, very different policies ranging from presavings to indexation of retirement ages have been justified in this way. We develop an overlapping-generations model in continuous time that encompasses different generations with different mortality rates and thus longevity. Allowing for trend increases in both longevity and productivity, we address the normative issue of intergenerational equity under a utilitarian criterion when future generations are better off in terms of both material and nonmaterial well-being. Increases in productivity and longevity are shown to have very different implications for intergenerational distribution. Further, the socially optimal retirement age, dependency ratio, and intergenerational burden sharing in the case of a trend increase in longevity are shown to depend on how individuals' utility for time/leisure is affected by age and longevity.

Projected demographic changes in industrialized and developing countries vary in extent and timing but will reduce the share of the population in working age everywhere. Conventional wisdom suggests that this will increase capital intensity with falling rates of return to capital and increasing wages. This decreases welfare for middle aged asset rich households. This paper takes the perspective of the three demographically oldest European nations – France, Germany and Italy – to address three important adjustment channels to dampen these detrimental effects of aging in these countries: investing abroad, endogenous human capital formation, and increasing the retirement age. Our quantitative finding is that endogenous human capital formation in combination with an increase in the retirement age has strong implications for economic aggregates and welfare, in particular in the open economy. These adjustments reduce the maximum welfare losses of demographic change for households alive in 2010 by about 2.2 percentage points in terms of consumption equivalent variation.

In this paper, we present a preliminary estimate of the financial impact of the recent reform of the Spanish pension system. After updating the projections of pension expenditure constructed in de la Fuente and Doménech (2010) for the period 2008–2060, we analyze the impact on this variable of raising the retirement age from 65 to 67 years, extending from 15 to 25 years the period over which wages are averaged to calculate the starting pension and increasing from 35 to 37 the number of contribution years required to obtain a ‘full pension.’ Conditional on a series of assumptions about the evolution of employment, productivity and demographics, our estimates suggest that these measures will reduce pension expenditure by up to 1.4 percentage points of GDP once the reforms have been fully implemented in 2027, thereby stabilizing pension expenditure at a bit over 9% of GDP during the transition period and preventing the emergence of a structural deficit in the system before the end of the next decade. On the other hand, the existing uncertainty about the future evolution of the relevant variables suggests that it would be desirable to bring forward in time the introduction of the periodic evaluation of the system (the so-called sustainability factor) so as to have in place a mechanism that can be used to modulate the rhythm and scope of the reform if the system's financial situation requires it before the end of the transitional period.

A general conclusion of the theoretical literature on pensions is, confronted to an increased longevity, to encourage continued activity. This literature however assumes a perfect labour market. The central question addressed in this article is whether it is still desirable to increase the retirement age when individuals face the risk of being unemployed.

In this purpose, we study the design of the P ay-As-You-Go pension system, focusing on the determination of the retirement age, in a model where people differ according to age only and face in every period a given probability of becoming unemployed.

We first determine the optimal pension system, which consists in a payroll tax rate, a pension benefit level and a retirement age and study its comparative statics with respect to a change of the unemployment rate and the length of life. Our main findings are the following. First, it is optimal to postpone retirement when life expectancy increases. Second, when unemployment benefits are low the optimal retirement age may decrease with the unemployment rate.

We then characterize the issue-by-issue voting equilibrium and compare it to the optimal pension scheme. It is shown that the median voter in general chooses a retirement age lower than the optimal one as well as a higher payroll tax rate.

Policymakers like to make use of age criteria, because they provide a transparent and seemingly objective standard. In reality, however, age limits are not as innocent as they appear: distinctions on the basis of age are often irrelevant and the actual age thresholds tend to be arbitrary. Age limits can also be criticised from a theoretical perspective: how can the heterogeneity of today's older people be reconciled with uniform age-defined classes? In response to a European Union Directive of 2000, Belgium implemented strict anti-discrimination legislation. This provides all the more reason to ascertain the prevalence and justification of the use of age criteria in legislation. Belgium is a federal state with three communities and three regions, and the scrutiny has been restricted to the Flemish community and region. All legislation has been screened for the use of 50 or more years as an age criterion, and all occurrences have been critically examined. The paper focuses on three fields of statutory regulation: early retirement, concessionary public transport fares, and the different care entitlements of people with disabilities and of older people. Evidence of age discrimination was found, although often in a form that benefits older people. The justification of the age criterion was often inadequate, so the adoption often appears no more than convenient standard practice. The paper concludes that policy makers should consider the systematic replacement of age thresholds by other criteria.