Social Security Programs and Retirement Around the World: Micro Estimation

Jonathan Gruber, David A. Wise

NBER Working Paper No. 9407
Issued in December 2002
NBER Program(s):Economics of Aging, Labor Studies, Public Economics

This is the introduction to and summary of the second stage of a international research project to study the relationship between social security provisions and retirement. The project relies on the analyses of a large group of economists in 12 countries who conduct the analysis for each of their countries. In the first stage we documented the enormous disincentives for continued work at older ages in many countries. The introduction to the first volume from the project concluded with a striking graph showing a strong relationship across countries between social security program incentives to retire and the proportion of older persons out of the labor force. The results in this volume show the large magnitude of these effects. Across 12 countries with very different social security programs and labor market institutions, the results consistently show that program incentives accord strongly with retirement decisions. The magnitude is illustrated by the simulations reported in each country paper. Considering the average across all countries, a reform that delays benefit eligibility by three years would likely reduce the proportion of men 56 to 65 out of the labor force between 23 and 36 percent, perhaps closer to 36 percent in the long run. On the other hand, an illustrative common reform'-- with early retirement at age 60, normal retirement age 65, and actuarial reduction in benefits between 65 and 60--has very disparate effects across the countries, depending on the provisions of the current program in each country. There is a strong correspondence between the simulation results and a priori expectations. The results leave little doubt that social security incentives have a strong effect on retirement decisions. And the estimates show that the effect is similar in countries with very different cultural histories, labor market institutions, and other social characteristics. While countries may differ in many respects, the employees in all countries react similarly to social security retirement incentives. The simulated effects of illustrative reforms reported in the country papers make clear that changes in the provisions of social security programs would have very large effects on the labor force participation of older employees.

download in pdf format
   (2537 K)

email paper

A non-technical summary of this paper is available in the July 2003 NBER Digest.  You can sign up to receive the NBER Digest by email.

A non-technical summary of this paper is available in the NBER Bulletin on Aging and Health. You can sign up to receive the NBER Bulletin on Aging and Health by email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w9407

Published: Introduction and Summary, Jonathan Gruber, David A. Wise. in Social Security Programs and Retirement around the World: Micro-Estimation, Gruber and Wise. 2004

Users who downloaded this paper also downloaded* these:
de Vos and Kapteyn Incentives and Exit Routes to Retirement in the Netherlands
Brugiavini and Peracchi Micro-Modeling of Retirement Behavior in Italy
Feldstein w11098 Structural Reform of Social Security
Gruber, Milligan, and Wise Introduction and Summary
Gruber, Milligan, and Wise w14647 Social Security Programs and Retirement Around the World: The Relationship to Youth Employment, Introduction and Summary
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us