Microeconometric Analysis of the Retirement Decision

Abstract

It has been suggested that much of the dramatic decline in the participation rate of Dutch elderly has been caused by features of the Dutch retirement income support system. The Dutch system consists of several alternative schemes that can be used to retire early and these schemes are characterised by relatively weak eligibility conditions and generous replacement rates. This report assesses empirically the impact of the incentives embedded in these schemes on the retirement behaviour of older workers using micro data. The econometric model is estimated on a rich panel survey, specifically designed for ageing research. The results indicate strong incentive effects from Early Retirement schemes on the probability to retire. We also find that Disability Insurance replacement rates have a negative effect on the transition rate to Early Retirement. Early retirement replacement rates also affect the transition rates of the other exit routes. This indicates that income streams of ...

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