Overview

Theoretical and empirical analysis of the relationship between retirement decision and pension systems, with policy recommendations for reversing the current trend toward early retirement. The contrasting trends toward earlier retirement and greater longevity have resulted in steadily increasing retirement costs over the last forty years. One important factor influencing early retirement decisions is the expansion of retirement benefits; but studies predict that most countries, particularly those with early retirement incentives, will be unable to meet future pension and social security obligations. In this timely CESifo volume, Robert Fenge and Pierre Pestieau examine empirical and theoretical evidence that explains why early retirement has become such a burden for social security systems and suggest pension system reforms that will reverse the trend. Drawing on evidence from the European Union (with comparisons to other industrialized countries including the United States and Canada), the authors demonstrate that the effective retirement age is influenced by social security regulations (such as a change in eligibility age) and discuss ways of measuring these embedded incentives. Fenge and Pestieau examine the implicit taxes on prolonged working life from normative and political economy perspectives. They discuss optimal payroll tax rates that minimize distortions of labor supply and retirement decisions and consider alternative ways to finance benefits, including consumption and capital income taxation. They discuss why policies are designed to discourage employment among older workers and why reforms to counter this often meet resistance. They demonstrate, contrary to the belief of many European governments, that pushing older workers into retirement does not free jobs for young unemployed workers. They show that the gap between salaries and productivity is an incentive for employers to rid themselves of older workers and argue that governments should not support this behavior by compensating older workers for the difference between severance payments and salaries in early retirement programs.

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This book combines interesting theoretical work on the design of social insurance programs with a clear discussion of recent trends in the labor market behavior of the elderly. A valuable advance in our understanding of optimal retirement policy. --James M. Poterba, Mitsui Professor of Economics, MIT Understanding how taxes affect corporate investment decisions is one of the most important, yet one of the most difficult, questions in applied economics. Dale Jorgenson's ongoing research on this topic stands as a how-to guide for applied economists in any field. It shows how theory and data analysis can come together to generate critically important insights on policy issues. --James M. Poterba, Mitsui Professor of Economics, MIT In the ever-changing world of tax policy, *Taxing Ourselves* remains a constant. It is an indispensable guide to the current US tax system and an accessible and insightful introduction to options for reform. --James M. Poterba, Mitsui Professor of Economics, MIT *Intermediate Public Economics* sets a new standard as a comprehensive text in public economic theory for advanced undergraduates and beginning graduate students. It combines clear and concise coverage of traditional topics, such as public goods, the theory of taxation, and externalities, with engaging and up-to-date discussion of more specialized topics such as political economy, fiscal federalism, and the effect of taxation on economic growth. --James M. Poterba, Mitsui Professor of Economics, MIT

This book combines interesting theoretical work on the design of social insurance programs with a clear discussion of recent trends in the labor market behavior of the elderly. A valuable advance in our understanding of optimal retirement policy. --James M. Poterba, Mitsui Professor of Economics, MIT This book summarizes recent research on the links between the structure of social security and early retirement. It is well written and covers a good deal of very new material. All in all, a very useful volume. --David Miles, Morgan Stanley and Imperial College, London Understanding the role of social security in promoting early retirement is crucial if we are to sustain social security programs during the coming demographic transition. Robert Fenge and Pierre Pestieau draw on their considerable expertise to examine both theoretical and empirical perspectives on this important issue. --Richard Disney, University of Nottingham and Institute for Fiscal Studies, London

Author Information

Robert Fenge is Senior Research Fellow at the Ifo Institute for Economic Research and Assistant Professor of Economics at the University of Munich. ierre Pestieau is Professor of Economics at the University of Liège. Fenge is coauthor (with Pierre Pestieau) of Social Security and Early Retirement (MIT Press, 2005). Pierre Pestieau is Professor of Economics at the University of Liège. Pestieau is coauthor (with Robert Fenge) of Social Security and Early Retirement (MIT Press, 2005).

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