Journal Article

Ageing and unused capacity in Europe: is there an early retirement trap?

Viola Angelini, Agar Brugiavini and Guglielmo Weber

in Economic Policy

Published on behalf of Center for Economic Studies of the University of Munich

Volume 24, issue 59, pages 463-508
Published in print July 2009 | ISSN: 0266-4658
Published online August 2014 | e-ISSN: 1468-0327 | DOI: https://dx.doi.org/10.1111/j.1468-0327.2009.00227.x
Ageing and unused capacity in Europe: is there an early retirement trap?

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  • Economic Growth and Aggregate Productivity
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We address the issue of how early retirement may interact with limited use of financial markets in producing financial hardship later in life, when some risks (such as long-term care) are not insured. We argue that the presence of financially attractive early retirement schemes in a world of imperfect financial and insurance markets can lead to an ‘early retirement trap’. Indeed, Europe witnesses many (early) retired individuals in financial distress. In our analysis we use data on 10 European countries, which differ in their pension and welfare systems, in prevailing retirement age and in households’ access to financial markets. We find evidence that an early retirement trap exists, particularly in some Southern and Central European countries: people who retired early in life are more likely to be in financial hardship in the long run. Our analysis implies that governments should stop making early retirement attractive, let retirees go back to work, improve access to financial markets and make sure long-term care problems are adequately insured.

— Viola Angelini, Agar Brugiavini and Guglielmo Weber

Journal Article.  16832 words.  Illustrated.

Subjects: Economic Growth and Aggregate Productivity ; Financial Regulation ; Health, Education, and Welfare ; Labour and Demographic Economics ; Macroeconomics and Monetary Economics ; Public Economics ; Regional Government Analysis

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