The impact of welfare state institutions on the early retirement patterns in Europe: a comparative analysis using the ECHP and the EU-SILC
Methodology and Statistics Tilburg University & CEPS/ INSTEAD Tilburg, The Netherlands
The purposes of this paper are twofold: first, it aims at evaluating the role of the welfare state institutions on the early retirement behaviour in Europe; secondly, it test if the impact of the welfare state on the early retirement patterns changed during the last decade, using the ECHP, the EU-SILC and macrodata from OECD and EUROSTAT.
In order to assess the flexibility of the social security system we created an eligibility index using the different characteristics of the pensions system by pillar and by gender. For the generosity of the welfare state we used as a proxy the replacement rates of the different benefits.
In order to evaluate the welfare state change over 10 years period in what concerns pension policies, we compared the situation from 2006-2007 (using EU-SILC) with the one in 1996-1997 ( using ECHP) and macrodata for all the countries for which we have information in both datasets. Using discrete choice modelling enabled us to include alternative exit routes such as unemployment or disability in our multinomial logit models. We have estimated a basic model with the socio-demographical and job related control variables, an institutional model and a welfare state regimes model with which we will test at the micro-macro level the results of our cluster analysis at the macrolevel. Since our representative sample consists of senior workers from the age of 45 to the age one year prior to eligibility for statutory pensions, we cover most of the transitions out of the labour market including those under the threshold used in previous studies.
We tested the way countries cluster according to these characteristics of the welfare state on 26 European countries. The results show that the generosity of the social security system is an important pull factor of the retirement decision. Compared with the situation in 1996, in 2006 the borders between regimes types became blurred, our results supporting Börsch-Supan (2006) conclusion on the diversity of the European states in their generosity towards elderly.