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Type: Journal Articles Authors: Michael Hurd, Pierre-Carl Michaud and Susann Rohwedder ISSN: Print 0143-5671 Online: 1475-5890
Published in: Fiscal Studies, Vol. 33, No. 1, March 2012
Volume, issue, pages: Vol. 33, No. 1, pp. 107-128
JEL classification: D91, J14, H31, H55 Keywords: saving, social security, displacement, international comparisons
The generosity of public pensions may depress private savings and provide incentives to retire early. While there is plenty of evidence supporting the latter effect, there remains considerable controversy over whether public pensions crowd out private savings. This paper uses international micro-data sets collected over recent years to investigate whether public pensions displace private savings. The identification strategy relies not only on cross-country differences in generosity but also on differences in the progressivity or non-linearity of pension formulas across countries. We estimate that an extra dollar of pension wealth depresses accumulated financial assets around the time of retirement by 22 cents. An extra 10,000 dollars in public pension wealth reduces the average retirement age by roughly one month, which implies an elasticity of years of retirement with respect to pension wealth of 0.15. Search |
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