Pension reform, retirement and life-cycle unemployment

This paper investigates the labor market impact of four often proposed policy measures for sustainable pensions: strengthening the tax benefit link, moving from wage to price indexation of benefits, lengthening calculation periods, and introducing more actuarial fairness in pension assessment. We consider the impact on three margins of aggregate labor supply, retirement behavior, job search and hours worked. We provide some analytical results and usea computational model to demonstrate the economic and welfare impact of recent pension reform in Austria. Reducing the distortion in the retirement decision by introducing pension supplements and discounts conditional on the chosen retirement date promises the largestgains in terms of GDP and welfare.