Early retirement behaviour in the Netherlands

In the early 1990s, the Dutch labour unions and employer organisations together agreed to transform the generous and actuarially unfair early retirement schemes into less generous and actuarially fair schemes that reward individuals for postponing retirement. The starting dates of these new retirement programs varied by industry sector. In this study, we exploit this variation in starting dates to estimate the causal impact of the policy reform on early retirement behaviour. We use a large administrative dataset, the Dutch Income Panel 1989−2000, to estimate hazard rate models for the retirement age. We conclude that the policy reform has indeed induced workers to postpone retirement. In particular, both reducing implicit taxes (the substitution effect) and reducing early retirement wealth (the wealth effect) are shown to have a positive impact on the retirement age.