Micro-Modeling of Retirement Decisions in Germany
Micro-Modeling of Retirement Decisions in Germany
Germans retire early, with average retirement age about fifty-nine-and-a-half years, half a year younger than the earliest eligibility age for old-age pensions and more than five years younger than the “normal” retirement age in Germany. Early retirement is a well-appreciated social achievement among Germans, but it is costly. Since life expectancy at age sixty is about seventeen years, a year of early retirement corresponds to more than 5 percent of pension expenditures. This chapter, which presents a study that is part of a multistage research project on the causes for, and the effects of, early retirement, provides econometric evidence for the strength of the incentive effects to retire early, based on micro-data. It is organized as follows. Sections 5.2 and 5.3 describe the institutional background for private-sector and civil servants' pensions. Section 5.4 presents data and variable specifications; Section 5.5 provides estimation results; and Section 5.6 explores what these estimates mean, simulates a set of pension reform steps, and concludes.
Keywords: early retirement, retirement incentives, private-sector employees, civil servants, pensions
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