Abstract
In this paper we analyze the influence that incentives play in the timing of the transition to retirement in Spain. We use the Continuous Sample of Working Histories 2006 (CSWH “Muestra Continua de Vidas Laborales”, in Spanish) to construct incentive measures from the Social Security provisions in relation to retiring at old age. We analyse the role played by such incentives and other socio-economic variables on the retirement hazard of men aged between 60 and 70, using a duration model to carry out a dynamic analysis. We assess the effects of the pension system reform that took place in 2002, which set stricter conditions to access an old pension. The results show that both the pension wealth and the substitution effects play a significant role in retirement decisions, but that, after the reform, the latter effects become less important.
Highlights
There has been a decline in the labour force participation of older workers, over the last decades
Under model A, we present the estimated coefficients obtained for the basic specification, distinguishing between the Accrual Rate (SSA) and the Peak Value (PV) as the incentive variable
Model B tries to capture the impact of the 2002 reform through the inclusion of dummy variables that test for its relevance and its impact on the response to the social security variables, while model C, includes dummy variables that capture the effect on the retirement hazard rate of having contributed to the minimum or the maximum amount at each age
Summary
There has been a decline in the labour force participation of older workers, over the last decades. Regarding the specific aim of this paper, there is quite a lot of research providing empirical evidence for Spain for the relationship between the incentives embedded in the social security rules and retirement decisions; e.g. Martín and Moreno (1990), Lopez-Garcia (1990), Gómez and Hernandez de Cos (2004) These studies focus on financial determinants to retire (the different rights acquired through age, gender, contributed earnings, years of contribution, pension replacement rates, etc) and the implicit incentives created by the system. As for the impact of minimum pensions, this time based on the estimation of the behavioural parameters of a structural model, Jimenez-Martín and Sánchez (2006, 2007) show that the existence of minimum pension regulation has an impact on early retirement decisions They find that the combination of age penalties and minimum pensions generate large incentives to early retirement for those workers with low wages and short labour histories. CairóBlanco (2010) analyses partial retirement incentives introduced in 2002 and its impact on the average age of retirement using the option-value framework
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
