The Impact of Values and Institutions on the Retirement Behaviour of the Low and High Skilled Worker

Abstract

The research presented in this paper examines the influence of values and institutions on the early retirement decision of low and high skilled workers. It not only views the influence of economic incentives to retire early, it also examines the impact of individual values, social norms, and institutions. The study analyses transitions out of work into retirement and uses comparative panel data in 23 countries including the Baltic and many East-European countries from EU-SILC 2005-2008, matched with EVS data for 2008 to estimate multinomial logit models. The results suggest that social norms do influence the early retirement decision, yet not entirely in the way as expected, whereas the effects of individual-level values appear to be negligible. The early retirement age and the statutory retirement age both appeared to be important, but they affect the retirement decision differently. The generosity of old-age pensions, expressed in terms of replacement rates, has the expected pull effect on early retirement. Furthermore, attention was paid to the position of women and low skilled workers facing more uncertainties accompanied with early retirement. The results indicate that there are some gender differences concerning the effects of social norms, and that mainly the institutional factors are more important for women than for men. As to differences across skill levels some social norms appeared more influential for high skilled workers, whereas work ethos exerts a stronger effect on the low skilled workers’ retirement decision. Replacement rates were of greater impact on the low skilled worker decision, but the effects of individual values and the early and statutory retirement age appear not to differ by education or skill level. Lastly, no clear differences were found across the six distinguished welfare regimes including the Eastern regime type.