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STICERD Work in Progress Seminars

Reference Dependence in Retirement Behavior: Evidence from German Pension Discontinuities

Arthur Seibold (Department of Economics, LSE)

Friday 17 November 2017 13:00 - 14:00

Many of our seminars and public events this year will continue as in person or as hybrid (online and in person) events. Please check our website listings and Twitter feed @STICERD_LSE for updates.

Unless otherwise specified, in-person seminars are open to the public.

Those unable to join the seminars in-person are welcome to participate via zoom if the event is hybrid.

About this event

This paper documents and analyzes an important and puzzling stylized fact about retirement behavior: the large concentration of job exits at specific ages. In Germany, around 30% of workers retire precisely in the month when they reach one of three “statutory” retirement ages, although there is often no incentive or even a disincentive to retire at these thresholds. To study what can explain the concentration of retirements around statutory ages, I use novel administrative data covering the universe of German retirees, and I take advantage of unique variation in retirement incentives as well as in the location of statutory ages across individuals created by the German pension system. Measuring retirement bunching responses to more than 600 different discontinuities in pension benefit profiles, I first document that financial incentives alone fail to explain retirement patterns in the data. Second, I show that there is a direct effect of “presenting” a threshold as a statutory age, which is substantially larger than that of financial incentives. Further evidence on mechanisms suggests the framing of statutory ages as reference points for retirement as a potential explanation. A number of alternative channels including firm responses are also discussed but they do not seem to drive the results. Finally, a model of retirement with reference-dependent decision utility is employed to interpret the observed patterns. Counterfactual simulations highlight that shifting statutory ages via pension reforms can be an effective policy to increase actual retirement ages with a positive fiscal impact.

STICERD Work in Progress seminars are held on Fridays in term time at 13:00-14:00, ONLINE, unless specified otherwise.

Seminar organisers: Philip Barteska and Alix Bonargent

For further information please contact Lubala Chibwe, either by email:

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