Population ageing is exerting unprecedented fiscal pressure on social security systems around the world. In response, many governments are implementing or planning pension reforms, often aimed at encouraging later retirement. A long-standing literature in public economics and labour economics investigates how the design of pension systems affects individual labour supply and retirement choices. In recent years, this literature has seen a revival, with a wave of new studies from Europe and the US combining high-quality administrative data, rigorous empirical methods, and conceptual innovations. This body of work has substantially advanced our knowledge of the effectiveness of various policy tools in encouraging later retirement and their welfare implications.

This book reviews insights from these new advances in research on retirement policy. Its primary objective is to distill policy lessons that can inform the intense ongoing policy debates and reform efforts in this area. The book begins by demonstrating that most major pension reforms in the last decades fall into a few common categories, and their effects on labour supply can be analysed within a simple framework. The authors then examine recent empirical evidence on the effectiveness of various reform options in impacting retirement behaviour and on social security finances. Beyond fiscal considerations, the book highlights the importance of assessing pension reforms by their ability to provide insurance against old-age poverty and to distribute resources fairly across socioeconomic groups. Moreover, the authors discuss interactions between pension reforms and other social insurance schemes. Drawing on the expertise of a set of leading academics, the book provides fresh perspectives on how to rethink pension reforms. 

We study adjustment costs in responses to income taxes, using administrative data from Cyprus and exploiting tax reforms that create and subsequently eliminate income tax kinks. Reduced-form evidence reveals substantial adjustment frictions attenuating bunching and de-bunching responses. Combining the empirical bunching moments with a structural model of frictional earnings supply, adjustment costs are estimated between EUR 93 and EUR 238 for wage earners. Moreover, we uncover important asymmetries in adjustment frictions, where bunching at a kink is costlier than de-bunching away from the kink. Finally, we find that self-employed individuals face considerably lower adjustment costs than wage earners.

We study firm responses to a large-scale change in apprenticeship regulation in Colombia. The reform requires firms to train, setting apprentice quotas that vary discontinuously in firm size. We document strong heterogeneity in responses across sectors, where firms in sectors with high skill requirements tend to avoid training apprentices, while firms in low-skill sectors seek apprentices. Guided by these reduced-form findings, we structurally estimate firms' training costs. Especially in high-skill sectors, many firms face large training costs, limiting their willingness to train apprentices. Yet, we find substantial overall benefits of expanding apprenticeship training, in particular when the supply of trained workers increases in general equilibrium. Finally, we show that counterfactual policies that take into account heterogeneity across sectors can deliver similar benefits from training while inducing less distortions in the firm size distribution and in the allocation of resources across sectors.

This paper studies the large concentration of retirement behavior around statutory retirement ages, a puzzling stylized fact. To investigate this fact, I estimate bunching responses to 644 different pension benefit discontinuities, using administrative data on the universe of German retirees. Financial incentives alone cannot explain retirement patterns, but there is a large direct effect of statutory retirement ages. Further evidence suggests the framing of statutory ages as reference points for retirement as a plausible explanation. Simulations based on estimated reference point effects highlight that shifting statutory ages via pension reforms can be an effective policy to increase actual retirement ages.

Public disability insurance (DI) programs in many countries are under pressure to reduce spending to maintain fiscal sustainability. In this paper, we investigate the welfare effects of expanding the role of private insurance markets in the face of public DI cuts. We exploit a reform that abolished one part of German public DI and use unique data from a larger insurer. We document modest crowding-out effects of the reform, such that private DI take-up remains incomplete. We find no adverse selection in the private DI market. Instead, private DI tends to attract individuals with high income, high education, and low disability risk. Using a revealed preference approach, we estimate individual insurance valuations. Our welfare analysis finds that partial DI provision via the voluntary private market can improve welfare. However, distributional concerns may justify a full public DI mandate.

Empirical evidence suggests that individuals often evaluate options relative to a reference point, especially seeking to avoid losses. In this paper, we provide the first welfare analysis under reference-dependent preferences. We decompose the welfare impact of changes in reference points and prices into direct and behavioral effects, and describe how these effects depend on whether reference dependence reflects a bias or a normative preference. In a simple model of loss aversion grounded in common empirical findings, we find that lowering reference points robustly improves welfare, while the welfare effect of a price change depends critically on normative judgments. We also derive sufficient statistics characterizations of the welfare effects of changing reference points and prices. We illustrate these theoretical findings with an empirical application to reference dependence exhibited in German workers' retirement decisions. Both simulation and sufficient statistics results suggest positive welfare effects of increasing the Normal Retirement Age, but ambiguous effects of financial incentives to postpone retirement. Finally, we study how adopting alternative models of reference dependent preferences modifies key welfare effects. 

We study how occupations shape individual and aggregate retirement behavior. First, we document large differences in individual retirement ages across occupations in U.S. data. We then show that retirement behavior among European workers is strongly correlated with U.S. occupational retirement ages, indicating an inherent association between occupations and retirement that is present across institutional settings. Finally, we find that occupational composition is an important determinant of aggregate retirement behavior across 45 countries. Our findings suggest that events affecting occupational structure, such as skill-biased technological change or international trade, have consequences for aggregate retirement behavior and social security systems. 

We study the influence of family members, neighbors and coworkers on retirement behavior. To estimate causal retirement spillovers between individuals, we exploit a pension reform in the Netherlands that creates exogenous variation in peers' retirement ages, and we use administrative data on the full Dutch population. We find large spillovers in couples, primarily due to women reacting to their husband's retirement choices. Consistent with homophily in social interactions, the influence of the average sibling, neighbor and coworker is modest, but sizable spillovers emerge between similar individuals in these groups. Additional evidence suggests both leisure complementarities and the transmission of social norms as mechanisms behind retirement spillovers. Our findings imply that pension reforms have a large social multiplier, amplifying their overall impact on retirement behavior by 40%.