The Forward-Looking Effect of Increasing the Full Retirement Age

Abstract

This paper analyses the effects of increasing the statutory retirement age for claiming full pension benefits on the labour force participation of middle-aged individuals and their partners. Identification relies on a difference-in-differences setting that exploits the heterogeneous increase in age eligibility for retirement caused by an unexpected pension reform. We detect a rise in the participation rate of middle-aged women that spills over into the labour supply of their husbands, who choose to postpone their retirement. The overall labour supply response has important implications for the extent of the fiscal externality associated with pension reforms that increase the retirement age.