The Retirement Effects of Old-Age Pension and Early Retirement Schemes in OECD Countries

Abstract

RESUMÉ The retirement effects of old-age pension systems and other social transfer programmes in OECD countriesThis paper examines the impact of old-age pension systems and other social transfer programmes on the retirement decision of older males in OECD countries.For each of the 55-59, 60-64 and 65+ age groups, a new panel dataset (22 OECD countries over 1969-1999 or shorter periods in some cases) of retirement incentives embedded in those schemes is constructed for an illustrative worker.The main focus is on the implicit tax rate on working for five more years, which sums up various dimensions of retirement incentives such as the pension accrual rate but also, to a lesser extent, the availability and generosity of benefits.There is currently wide dispersion across OECD countries in implicit tax rates on continued work embedded in old-age pension and early retirement schemes: they are high in most Continental European Countries, compared with Japan, Korea, English-speaking and Nordic countries.Simple cross-country correlations and panel data econometric estimates both show that implicit taxes on continued work have sizeable effects on the departure of older male workers from the labour force.For the 55-59 age group, there is clear evidence that these effects result from a number of social transfer programmes, which have been used de facto as early retirement schemes, rather than from old-age pension systems themselves.For the 60-64 and 65+ age groups, eligibility ages also appear to have a specific impact on the retirement decision, probably reflecting liquidity and/or customary effects. JEL Classification: H55