Public Finance in the Era of the COVID-19 Crisis
18-20 August 2021 | Online, Organized by University of Iceland, Reykjavík
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Please note that all times are shown in the time zone of the conference. The current conference time is: 2nd Dec 2021, 01:04:01pm GMT
A06: Retirement and Disability Insurance
10:45am - 11:07am
Welfare Effects of Pension Reforms
Norwegian School of Economics, Norway
In almost all developed countries, policy makers have implemented pension reforms by increasing statutory retirement ages, lowering pension levels and/or adjusting pension formulas to address demographic change. This paper provides a novel, unifying framework to evaluate the welfare effects of such pension reforms. I show that the welfare effect of a pension reform crucially depends on the fiscal multiplier -- the total fiscal effect divided by the mechanical fiscal effect. Empirically, I exploit a series of pension reforms in Austria. I find that increasing the early retirement age has a multiplier of 1 while reducing pension levels generates a multiplier of 1.5. Based on my estimates, a social planner with preferences for redistribution clearly favors reducing pension levels over increasing the early retirement age.
11:07am - 11:30am
Saving For Retirement Through The Public Pension System: Evidence From The Self-Employed In Spain
Paris School of Economics, France
Using the fact that the Spanish self-employed voluntarily choose their contributions to Social Security, I study the effect of financial incentives on public pension savings for self-employed workers in Spain. For this, I implement a difference-in-differences approach exploiting the change in public pension saving incentives induced by the 1997 pension reform. I find that the Spanish self-employed significantly respond to the financial incentives for public pension savings. However, the estimated response could be considered modest relative to the magnitude of the return to contributions provided by pension formulas in Spain. I provide evidence suggesting that the lack of salience of the return to contributions could be one of the main drivers of such a modest response, highlighting the importance of information and salience on the responsiveness of self-employed workers to saving incentives.
11:30am - 11:52am
Spousal Spillovers in Retirement: A Structural Assessment
1Norges Bank, Norway; 2Statistics Norway
This paper provides a quantitative analysis of the impact of joint retirement on aggregate labor supply elasticities. We extend a standard life-cycle retirement model by incorporating dual-earner households with heterogeneous age gaps and non-separable leisure preferences. To structurally estimate the degree of non-separability we exploit recent quasi-experimental reduced form evidence of spousal retirement spillover effects, from a major Norwegian pension reform. We find evidence of considerable leisure complementaries. Despite large age disparity between spouses, the estimated model importantly generates a high degree of joint retirement, in line with the pattern observed in the data. By solving for the long-run impact of the Norwegian reform we show that leisure complementarity is also quantitatively important. Comparing our estimated model to a model with separability in leisure we find that complementarity accounts for one-third of the reform-induced long-run increase in old-age labor supply.
11:52am - 12:15pm
Privatizing Disability Insurance
1University of Mannheim, Germany; 2ZEW Mannheim, Germany
In light of rising expenditure, social insurance programs face pressure to cut back their generosity to remain sustainable. Such reforms are often accompanied by the idea that individuals can obtain private insurance. In this project, we investigate how the private disability insurance (DI) market responds to a large change in public DI in Germany. Using a combination of administrative data on public DI claims and data from a large private insurance provider, we analyze the reform of 2001, which abolished a type of public DI for younger birth cohorts. We document that the private DI market multiplies in size after the reform. Results from a difference-in-difference strategy suggest a significant causal effect on private DI coverage among affected individuals. Yet, the estimated post-reform coverage rate remains modest. Moreover, we find that the share of privately insured individuals is lower among those with higher occupational disability risk and with lower income.
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