Reference Points for Retirement Behavior: Evidence from German Pension Discontinuities
AbstractThis paper studies the large concentration of retirement behavior around statutory retirement ages, a puzzling stylized fact. To investigate this fact, I estimate bunching responses to 644 pension benefit discontinuities, using administrative data on the universe of German retirees. Financial incentives alone cannot explain retirement patterns, but there is a large direct effect of statutory retirement ages. I argue that the framing of statutory ages as reference points for retirement provides a plausible explanation. Simulations based on a model with reference dependence highlight that shifting statutory ages via pension reforms is an effective policy to influence retirement behavior.
CitationSeibold, Arthur. 2021. "Reference Points for Retirement Behavior: Evidence from German Pension Discontinuities." American Economic Review, 111 (4): 1126-65. DOI: 10.1257/aer.20191136
- D91 Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
- H55 Social Security and Public Pensions
- J26 Retirement; Retirement Policies
- J32 Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions