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  4. April 2021
  5. Reference Points for Retirement Behavior: Evidence from German Pension Discontinuities

American Economic Review

ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)

Reference Points for Retirement Behavior: Evidence from German Pension Discontinuities

  • Arthur Seibold
American Economic Review
vol. 111, no. 4, April 2021
(pp. 1126–65)
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Abstract

This 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.

Citation

Seibold, Arthur. 2021. "Reference Points for Retirement Behavior: Evidence from German Pension Discontinuities." American Economic Review, 111 (4): 1126–65. DOI: 10.1257/aer.20191136

Additional Materials

JEL Classification

  • 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