Title: Social Security Programs and Retirement around the World: Micro-Estimation
Abstract: Social Security Programs and Retirement Around the World: Micro-Estimation, edited by Jonathan Gruber and David A. Wise, 2004, Chicago, IL: The University of Chicago Press Social Security Programs and Retirement Around the World: Micro-Estimation is the second volume of an ongoing research project studying the relationship between social security and labor supply. In the first volume, Gruber and Wise reveal strong disincentives to continue working at older ages in developed countries. In many social security programs, provisions are revealed that essentially encourage retirement by reducing total compensation for working. The second volume uses microdata to further analyze retirement behavior on a country-by-country basis. The results in this volume provide an important complement to the first volume in that the results leave little doubt that social security incentives are an important factor in the retirement decision-making process. Around the world, a major demographic tide of declining birthrates is pushing nations further away from the promises that they have made to seniors. Additional salient issues driving the need to reform social insurance include more women in the global workplace, rising divorce rates, changing employment patterns, and rising budget deficits. The combination of changing employment life-cycle behavior and increasing average age of populations in various developed countries, coupled with social security stipulations that have contributed to the decline in the labor force participation of older persons, can substantially reduce the productive capacity of the labor force. While most of the political discussion, at least in the United States, has centered on preserving social security benefits, less attention has been given to the incentive/disincentive employment and early retirement effects of various proposals. The Gruber and Wise book addresses this issue using a logical and salient process. The social security programs in most industrialized countries are financed on a payas-you-go basis. Under this arrangement, most countries have accumulated large unfunded liabilities and face looming financial burdens. The penalty on work induces older employees to leave the labor force early and thus magnifies the financial burden caused by population aging. While the first stage of the Gruber and Wise project produced two major results-(1) social security systems in many countries are laden with strong incentives to leave the labor force at older ages, and (2) a positive relationship between these incentives to retire and the departure of senior workers from the work force-it did not provide a method for estimating the magnitude of plan provision changes on labor force participation. Social Security Programs and Retirement Around the World uses substantial databases of individuals compiled by research teams in 12 different countries. The data in each country match information on retirement decisions to the retirement incentives inherent in the social security provisions of each country. Across these 12 countries, noteworthy in their characteristically diverse social security programs and labor market institutions, the results consistently support the contention that program incentives are significantly aligned with retirement decisions. According to the Gruber and Wise, the key advantage of the microestimation approach is that in each country the effects of changes in social security stipulations on retirement decisions can be predicted. Each paper illustrates the country-specific effects of two different reforms. One simulated reform assumes provisions that are common in each of the countries of interest to the study-reducing retirement incentives in some countries and increasing incentives in others. …
Publication Year: 2007
Publication Date: 2007-12-01
Language: en
Type: article
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