Download - Izmir
It is never too late?
Evidence on increasing the retirement age in a transition economy
Oliwia Komada
Paweł Strzelecki
Joanna Tyrowicz
Group for Research in Applied Economics
2
Low effective retirement age in aging population
HUGE FISCAL BURDEN
Issues common to many (not only transition) countries
Longevity ... ... aggravated with (really!) early retirement, see Fox (1997)
1975 2015 2060
3
Low effective retirement age in aging population
average female exit age in 2006 in Poland: 52 years
Solutions:
introduce universal Defined Contribution systems
Poland 1999
gradually reduce the occupational privileges
Poland 2009
4
Reform 2009
Prior to 2009 After 2009
W born before 1954 Experience 25 age 55 Experience 25 age 55
W born after 1954 Experience 25 age 55 Experience 25 age 60*
M born before 1949 Experience 25 age 60 Experience 25 age 60
M born after 1949 Experience 25 age 60 Experience 25 age 65*
• Selected occupation based on medical criteria
HUGE
85% of workers lost eligibility for early retirement
RAPID
final legislation was passed in 4th quarter of 2008
8
Table of contents
1. Motivation Reform form 2009 natural experiment for regression discontinuity design
(No) result at the first sight
2. Hypothesis, data and method Hypothesis
Dataset
RDD method
3. Results Main result
Placebo test
Room for heterogenity
4. Conclusions
9
Earlier insights
For the US (or other advanced economies): Krueger and Pischke (1992); Jensenand Richter (2003); Snyder and Evans (2006); Liebman et al. (2009);Mastrobuoni (2009); Blau and Goodstein (2010); Staubli and Zweimoeller(2011); Behaghel and Blau (2012), summarized wonderfully by Manoli andWeber (2014)
For transition economies:
Jensen and Richter (2003) for Russia
Danzer (2013) for Ukraine
Bottom line: „pass-through" is not complete, but people respond to changes inincentives
10
Hypothesis
Does reform increase effective retirement age? lower flows to retirement
increase in labor force participation
lower flows to inactivity
11
Data
Exploit the rotating panel
Compute the age on Jan 1st, 2009 (adequate up to 1 month)
Focus on transitions (earlier literature focuses on stocks)
Control for confounding factors (age, education, household structure)
Control for eligible/ineligible occupations
12
Method: Regression discountity disign
Assigment
Outcome measurement
Transition to early retirement
-1 -0.25 0 0,25 1
Women bornin 4q 1954
Women bornin 1q 1954
Women bornin 3q 1953
Women bornin 1q 1953
13
Results
RD estimation results:transition to early retirement
Parb
ability
of
transitio
nto
earl
yre
tire
ment
Time after the retirement age (1st January 2009)
Cut off point
Discontinuity
14
Method: Regresion discontinuity design
Treated = 1 would have a right but lost it beacuse of 2009 Reform
Control Variables (heterogeneity)
Gender
Education
Small child in household
Other retired in household
Other worker in household
15
Expectation and reality
Expectations Results
Large changes
Large discontinuitySignificant but small effect
Stronger effect for workers who losteligibility
Treatment variable insignificant
Heterogenous Effect Not observe
16
Results
RD estimation results:parameter of cut-off and its significance
Model Coefficient Std. ErrZ-
statisticSignificance
level
Transition to earlyretirement 6%
-0.0270 0.0095 2.836 0.005
Remain active 94% 0.0108 0.0066 1.670 0.102
Transition to inactivity(age) 6%
-0.0269 0.0095 2.829 0.005
Transition to inactivity (tenure) 6% -0.0221 0.0095 2.324 0.020
19
Almost two thousand regressions
1 2 3 4
Reform quarter 0.3310***(0.048)
0.3311***(0.048)
0.3309***(0.048)
0.3312***(0.048)
Treatment 0.0000(0.016)
0.0000(0.016)
0.0000(0.016)
0.0000(0.016)
Other retire in hh -0.0437(0.028)
Other worker in hh -0.0331(0.029)
Kid in hh -0.0637**(0.027)
Female -0.0229(0.029)
FE for outcomes variables Yes Yes Yes Yes
Observations 2,575 2,575 2,575 2,575
Probit of likelihood to get a signicant estimator
20
Sum up
Discontinuity: statistically significant, but economically small
Placebo test: similar size of discontinuity in other quarters (butinsignificant)
Heterogeneity possibly the discontinuities observed in the reform quarter slightly stronger in some group
of individuals than in others
Access to early retirement schemes willingness to retire no substantially smaller among the workers who lost the occupational
eligibility than among those who still could
21
Conclusion
Discontinuity from the reform: small relative to the scope of the reform
Almost no heterogeneity
Would have happened even without the reform?
Questions or suggestions?Thank you for your attention!
Oliwia [email protected]
More about our research on
http://grape.uw.edu.pl
Twitter: @GrapeUW
23
References
Behaghel, L. and Blau, D. (2012). Framing social security reform: behavioral responses to changesmin the full
retirement age. American Economic Journal: Economic Policy, 4:41-67.
Blau, D. and Goodstein, R. (2010). Can social security explain trends in labor force participation of older men in the
United States? Journal of Human Resources, 45:328-363.
Danzer, A. (2013). Benet generosity and the income eect on labour supply: quasi-experimental evidence. Economic
Journal, 123:1059{1084.
Fox, L. (1997). Pension reform in the post-communist transition economies. In Nelson, J. M.,
Tilly, C., and Walker, L., editors, Transforming Post-Communist Political Economies. National Academy Press,
Washington, D.C.
Jensen, R. and Richter, K. (2003). The health implications of social security failure: evidence from the Russian
pensions. Journal of Public Economics, 88:209-236.
Krueger, A. and Pischke, J.-S. (1992). The eect of social security on labor supply: a cohort analysis of the notch
generation. Journal of Labor Economics, 10:4120{4437.
Liebman, J., Luttmer, E., and Seif, D. (2009). Labor supply responsens to marginal Social Security benets: Evidence
from discontinuities. Journal of Public Economics, 93:1224-1233.
Manoli, D. and Weber, A. (2014). Intertemporal substitution in labor force participation: evidence from policy
discontinuities. CESifo Working Paper Series 4619, CESifo.
Mastrobuoni, G. (2009). Labor supply eects of the recent social security benet cuts: Empirical estimates using cohort
discontinuities. Journal of Public Economics, 93(11):1224-1233.
Snyder, S. and Evans, W. (2006). The efect of income on mortality: evidence from social security notch. Review of
Economics and Statistics, 88:482-495.