We show how the age profile of earnings, retirement rules and retirement behavior are tightly linked through the general equilibrium of the economy. Generous Social Securitybenefits financed by large Social Security taxes discourage human capital accumulation. In Social Security systems where Social Security benefits prioritize redistribution less productiveworkers with lower levels of human capital tend to retire earlier. These out flows of workers from the labor force tend to generate wage pro les that are monotonically increasing over age and labor markets that display larger seniority premia.This paper theoretically rationalizes the links between retirement rules and the wage structures over the life cycle and uses data on European countries to show how social security taxes, the age profile of earnings, and retirement behavior are related.

Netspar, Network for Studies on Pensions, Aging and Retirement, is een denktank en kennisnetwerk. Netspar is gericht op een goed geïnformeerd pensioendebat.

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