TY  - JOUR
AU  - Boersch-Supan,Axel
TI  - Incentive Effects of Social Security Under an Uncertain Disability Option
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 7339
PY  - 1999
Y2  - September 1999
UR  - http://www.nber.org/papers/w7339
L1  - http://www.nber.org/papers/w7339.pdf
N1  - Author contact info:
Axel H. Boersch-Supan
Munich Center for the Economics of Aging
Max Planck Institute
for Social Law and Social Policy
Amalienstrasse 33
80779 Munich
GERMANY
Tel: +49 (89) 3860-2355
Fax: 49 (89) 3860-2390
E-Mail: axel@boersch-supan.de
AB  - Incentive effects of pension systems are usually estimated under the assumption that the institutional environment provides a single optimal 'pathway' for retirement.  However, many countries provide competing pathways which may include several early retirement options in addition to normal retirement.  Moreover, early retirement options often comprise special provisions for disabled and unemployed workers that can be strategically manipulated by the employer and the employee while ultimate eligibility for such provisions is uncertain in advance. This paper shows that ignoring the endogeneity and/or uncertainty in the relevant institutional setting can severely bias the estimates of incentive effects.  Ignoring the endogeneity leads to overestimated incentive effects that unduly exaggerate the 'pull' view of early retirement.  In turn, when the uncertain option set is specified too generously, incentive effects are underestimated. The paper proposes several estimates to bound the true incentive effects of social security on early retirement, and applies them to the German public pension system.
ER  -