French, E., Lindner, A., O'Dea, C., Zawisza, T.

Labor Supply and the Pension Contribution-Benefit Link

CWPE2248

Abstract: We estimate the impact of public pension systems on labor supply far from the normal retirement age by exploiting Poland's switch from a Defined Benefit to a Notional Defined Contribution scheme for men born after 1948. Using the universe of taxpayers and this sharp cohort-based discontinuity in the link between current contributions and future benefits, we estimate an employment elasticity with respect to the return to work of 0.44 for ages 51-54. We estimate a lifecycle model that matches these results. The model implies that the change in the contribution-benefit link from the reform increases employment among those in their 30s but decreases it at older ages, reducing overall labor supply across the lifecycle by 2 months.

Keywords: Labor supply, pensions, contribution-benefit link, defined benefit, defined contribution

JEL Codes: D15 H55 J22 J26

Author links: Eric French  

PDF: https://www.econ.cam.ac.uk/research-files/repec/cam/pdf/cwpe2248.pdf

Open Access Link: https://doi.org/10.17863/CAM.89412

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