1. It is never too late?
Evidence on increasing the retirement age in a transition economy
Oliwia Komada
Paweł Strzelecki
Joanna Tyrowicz
Group for Research in Applied Economics

2. 2
Low effective retirement age in aging population
HUGE FISCAL BURDEN
Issues common to many (not only transition) countries
 Longevity ...
 ... aggravated with (really!) early retirement, see Fox (1997)
1975 2015 2060

3. 3
Low effective retirement age in aging population
average female exit age in 2006 in Poland: 52 years
Solutions:
 introduce universal Defined Contribution systems
Poland 1999
 gradually reduce the occupational privileges
Poland 2009

4. 4
Reform 2009
Prior to 2009 After 2009
W born before 1954 Experience 25 age 55 Experience 25 age 55
W born after 1954 Experience 25 age 55 Experience 25 age 60*
M born before 1949 Experience 25 age 60 Experience 25 age 60
M born after 1949 Experience 25 age 60 Experience 25 age 65*
• Selected occupation based on medical criteria
 HUGE
 85% of workers lost eligibility for early retirement
 RAPID
 final legislation was passed in 4th quarter of 2008

5. 5
Story beginning
Labor force participation

6. 6
Motivation
Percent of retirement by age and year for men

7. Motivation
7
Percent of retirement by age and year for women

8. 8
Table of contents
1. Motivation
 Reform form 2009 natural experiment for regression discontinuity design
 (No) result at the first sight
2. Hypothesis, data and method
 Hypothesis
 Dataset
 RDD method
3. Results
 Main result
 Placebo test
 Room for heterogenity
4. Conclusions

9. 9
Earlier insights
 For the US (or other advanced economies): Krueger and Pischke (1992); Jensen
and Richter (2003); Snyder and Evans (2006); Liebman et al. (2009);
Mastrobuoni (2009); Blau and Goodstein (2010); Staubli and Zweimoeller
(2011); Behaghel and Blau (2012), summarized wonderfully by Manoli and
Weber (2014)
 For transition economies:
 Jensen and Richter (2003) for Russia
 Danzer (2013) for Ukraine
 Bottom line: „pass-through" is not complete, but people respond to changes in
incentives

10. 10
Hypothesis
Does reform increase effective retirement age?
 lower flows to retirement
 increase in labor force participation
 lower flows to inactivity

11. 11
Data
 Exploit the rotating panel
 Compute the age on Jan 1st, 2009 (adequate up to 1 month)
 Focus on transitions (earlier literature focuses on stocks)
 Control for confounding factors (age, education, household structure)
 Control for eligible/ineligible occupations

12. 12
Method: Regression discountity disign
Assigment
Outcome measurement
 Transition to early retirement
-1 -0.25 0 0,25 1
Women born
in 4q 1954
Women born
in 1q 1954
Women born
in 3q 1953
Women born
in 1q 1953

13. 13
Results
RD estimation results:
transition to early retirement
Parbabilityoftransitionto
earlyretirement
Time after the retirement age (1st January 2009)
Cut off point
Discontinuity

14. 14
Method: Regresion discontinuity design
 Treated = 1 would have a right but lost it beacuse of 2009 Reform
 Control Variables (heterogeneity)
 Gender
 Education
 Small child in household
 Other retired in household
 Other worker in household

15. 15
Expectation and reality
Expectations Results
Large changes
Large discontinuity
Significant but small effect
Stronger effect for workers who lost
eligibility
Treatment variable insignificant
Heterogenous Effect Not observe

16. 16
Results
RD estimation results:
parameter of cut-off and its significance
Model Coefficient Std. Err
Z-
statistic
Significance
level
Transition to early
retirement 6%
-0.0270 0.0095 2.836 0.005
Remain active 94% 0.0108 0.0066 1.670 0.102
Transition to inactivity
(age) 6%
-0.0269 0.0095 2.829 0.005
Transition to inactivity
(tenure) 6% -0.0221 0.0095 2.324 0.020

17. 17
Results
But don't people always retire at retirement?

18. 18
Placebo test
RD estimation results:
transition to early retirement
Sizeofdiscontinuity

19. 19
Almost two thousand regressions
1 2 3 4
Reform quarter 0.3310***
(0.048)
0.3311***
(0.048)
0.3309***
(0.048)
0.3312***
(0.048)
Treatment 0.0000
(0.016)
0.0000
(0.016)
0.0000
(0.016)
0.0000
(0.016)
Other retire in hh -0.0437
(0.028)
Other worker in hh -0.0331
(0.029)
Kid in hh -0.0637**
(0.027)
Female -0.0229
(0.029)
FE for outcomes variables Yes Yes Yes Yes
Observations 2,575 2,575 2,575 2,575
Probit of likelihood to get a signicant estimator

20. 20
Sum up
 Discontinuity: statistically significant, but economically small
 Placebo test: similar size of discontinuity in other quarters (but
insignificant)
 Heterogeneity
 possibly the discontinuities observed in the reform quarter slightly stronger in some group
of individuals than in others
 Access to early retirement schemes
 willingness to retire no substantially smaller among the workers who lost the occupational
eligibility than among those who still could

21. 21
Conclusion
 Discontinuity from the reform: small relative to the scope of the reform
 Almost no heterogeneity
 Would have happened even without the reform?

22. Questions or suggestions?
Thank you for your attention!
Oliwia Komada
o.komada@student.uw.edu.pl
More about our research on
http://grape.uw.edu.pl
Twitter: @GrapeUW

23. 23
References
 Behaghel, L. and Blau, D. (2012). Framing social security reform: behavioral responses to changesmin the full
retirement age. American Economic Journal: Economic Policy, 4:41-67.
 Blau, D. and Goodstein, R. (2010). Can social security explain trends in labor force participation of older men in the
United States? Journal of Human Resources, 45:328-363.
 Danzer, A. (2013). Benet generosity and the income eect on labour supply: quasi-experimental evidence. Economic
Journal, 123:1059{1084.
 Fox, L. (1997). Pension reform in the post-communist transition economies. In Nelson, J. M.,
 Tilly, C., and Walker, L., editors, Transforming Post-Communist Political Economies. National Academy Press,
Washington, D.C.
 Jensen, R. and Richter, K. (2003). The health implications of social security failure: evidence from the Russian
pensions. Journal of Public Economics, 88:209-236.
 Krueger, A. and Pischke, J.-S. (1992). The eect of social security on labor supply: a cohort analysis of the notch
generation. Journal of Labor Economics, 10:4120{4437.
 Liebman, J., Luttmer, E., and Seif, D. (2009). Labor supply responsens to marginal Social Security benets: Evidence
from discontinuities. Journal of Public Economics, 93:1224-1233.
 Manoli, D. and Weber, A. (2014). Intertemporal substitution in labor force participation: evidence from policy
discontinuities. CESifo Working Paper Series 4619, CESifo.
 Mastrobuoni, G. (2009). Labor supply eects of the recent social security benet cuts: Empirical estimates using cohort
discontinuities. Journal of Public Economics, 93(11):1224-1233.
 Snyder, S. and Evans, W. (2006). The efect of income on mortality: evidence from social security notch. Review of
Economics and Statistics, 88:482-495.