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Public pensions and labor supply over the life cycle

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Abstract

In order to remain fiscally solvent, governments of many countries have reformed their public pension schemes to encourage labor supply at older ages. These reforms include reductions in the generosity of public pensions and reduced penalties for working past the normal retirement age. In this paper, we consider how reforms to public pension systems affect labor supply over the life cycle. We put the recent empirical evidence on the effect of government pensions on labor supply in a life cycle context, and we present evidence on the effectiveness of tax reforms for stimulating labor supply over the life cycle. Our main conclusion is that the labor supply of older workers is responsive to changes in retirement incentives. The labor supply of younger workers is less responsive. Thus the trend towards lower taxes on older workers in many developed countries should continue to fuel their trend towards later retirement.

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Authors and Affiliations

  1. Division of Economic Research, Federal Reserve Bank of Chicago, 230 S. LaSalle St., Chicago, IL, 60604, USA

    Eric French

  2. Department of Economics, BA-110, University at Albany, SUNY, Albany, NY, 12222, USA

    John Jones

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  1. Eric French
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  2. John Jones
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Correspondence to Eric French.

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French, E., Jones, J. Public pensions and labor supply over the life cycle. Int Tax Public Finance 19, 268–287 (2012). https://doi.org/10.1007/s10797-011-9184-x

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