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Proof From Germany – Heart for Retirement Analysis

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Summary

We offer new proof of forward-looking labor provide responses to modifications in pension wealth.  We exploit a 2014 German reform that elevated pension wealth for moms by a median of 4.4 % per youngster born earlier than January 1992.  Utilizing administrative information on the universe of working histories, we implement a difference-in-differences design evaluating ladies who had their first youngster earlier than versus after January 1, 1992.  We doc important reductions in labor earnings, pushed by intensive margin responses.  Our estimates suggest that, on common, an additional euro of pension wealth in a given interval reduces unconditional labor earnings by 54 cents.

The paper discovered that:

  • Modifications within the generosity of public pension methods can have an effect on labor provide conduct removed from retirement.
  • Reductions in labor earnings, pushed by intensive margin responses, suggest that, on common, an additional euro of pension wealth in a given interval reduces unconditional labor earnings by about 54 cents.
  • Responses are bigger amongst ladies with decrease predicted returns to tenure and better pre-reform pension wealth and ladies whose companions are nearer to the statutory retirement age.
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The coverage implications of the findings are:

  • People are ahead trying and reply to pension modifications far earlier than retirement age.
  • Spillovers throughout the family can amplify responses to particular person incentives.
  • This suggests that pension reforms can have combination labor provide results properly past the direct impression on people on the verge of retirement.

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