Employment and substitution effects of raising the statutory retirement age in France

Abstract

AbstractIncreasing 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.