The Effect of Social Security Reform on Retirement

Guenther Fink, Harvard School of Public Health

We analyze panel data for 40 countries over the period 1970-2000 to examine the effect of social security reform on the labor supply of older men. The data show a trend towards earlier retirement which can partially be explained by rising income levels. We find the average retirement age rises significantly when either the normal, or early, social security eligibility age rises, or pension benefits for postponing retirement are increased. A shift from a defined benefit to a defined contribution system, holding other factors such as the expected replacement rate constant, leads to a large increase in the average retirement age.