Pension Benefits & Retirement Decisions: Income vs. Price Elasticities
Abstract
We separately identify the income and price elasticities in individuals’retirement decisions. We develop a dynamic model of retirement decisions that establishes a precise relationship between a structural parameter and these elasticities. Next, we estimate these elasticities in a proportional hazard specification that is independent of any assumptions of the dynamic model. The elasticities are identified and estimated using policy variation from pension reforms in Austria and administrative data from the Austrian Social Security Database. We then use these elasticities to estimate the dynamic model and examine the labor supply and welfare consequences of potential social security reforms.
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