1. Pensions and retirement
  2. Dynamic microsimulation
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The impact of the retirement decision and demographics on pension sustainability: A dynamic microsimulation analysis

  1. Concepció Patxot  Is a corresponding author
  2. Meritxell Solé  Is a corresponding author
  3. Guadalupe Souto  Is a corresponding author
  4. Martin Spielauer  Is a corresponding author
  1. Universitat de Barcelona, Spain
  2. Universitat Autònoma de Barcelona, Spain
  3. Austrian Institute of Economic Research (WIFO), Austria
Research article
Volume 11(2) Summer 2018
Cite this article as: C. Patxot, M. Solé, G. Souto, M. Spielauer; 2018; The impact of the retirement decision and demographics on pension sustainability: A dynamic microsimulation analysis; International Journal of Microsimulation; 11(2); 84-108. doi: 10.34196/ijm.00181
13 figures and 8 tables

Figures

Figure 1
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Average wage and pension growth rates (1995–2060).

Sources: Annual Economic Database (1995–2008), European Commission and Spanish Social Security (2008–2060), authors’ calculations.

Figure 2
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Behavioural versus non-behavioural model.
Figure 3
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Effects of the 2011 reform on the level of entry pensions (% change).
Figure 4
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Effects of the 2011 reform on the number of entry pensions (% change).
Figure 5
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Effects of the 2011 reform on the pension expenditure to wage bill ratio (% change).
Figure 6
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Educational attainment by gender.

Source: Authors’ calculations based on MEC (2010).

Figure 7
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Proportion of population with university studies employed in the highest contribution group.
Figure 8
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The effect of education on pensions (% change).

Notes: LE represents the “lower education” scenario and AO the “absence of over-education” scenario as explained in the text.

Figure 9
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Labour force evolution (2008–2060). Baseline.
Figure 10
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The effect of higher female participation on pensions (changes in %).
Figure C.1
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Effect of the current crisis on pensions (level and number).
Figure C.2
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Effect of the current crisis on other indicators.
Figure G.1
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Effect of the current crisis on pensions (level and number).

Tables

Table 1
Retirement model (Hazard ratios).
Men Women
Age 43.08 ** 77.87 **
Age Sq. 0.972 ** 0.968 **
Secondary studies 1.050 ** 1.142 **
University studies 1.062 ** 1.271 **
First year retired 2.042 ** 2.545 **
Unemployed 0.313 ** 0.000
Unemployment benefit 1.000 * 1.000
Wage (1000 € change) 0.994 ** 0.993 **
PV(a) 0.995 ** 0.992 **
Time to max. pension 0.930 ** 0.968
Age at max. pension 1.000 1.000
Replacement rate 1.146 ** 1.199
Minimum pension 0.926 ** 0.862 **
Months since eligible(log) 2.627 ** 3.182 **
Unemployment rate 0.986 ** 0.991
Constant 0.000 ** 0.000 **
  1. (a)

    Base category: less than secondary.

  2. (b)

    **Significant at 5º% level.

  3. (c)

    **Significant at 10º% level.

  4. (d)

    Difference with respect to maximum pension, 1000 € change.

Table A.1
Hazard rate model for retirement with SSW incentives.
Men
Hazard ratio		 Standard error Women
Hazard ratio		 Standard error
Age 154.48 47.83 ** 9.909 4.223 **
Age Sq. 0.952 0.002 ** 0.971 0.003 **
Secondaty studies 0.916 0.028 ** 0.890 0.045 **
Universitary studies 0.943 0.032 * 0.966 0.062
First year retired 4.176 0.164 ** 3.805 0.409 **
Unemployed 0.673 0.026 ** 0.726 0.038 **
Unemployed benefit 0.287 0.069 ** 0.222 0.072 **
Wage (1000 € change) 0.910 0.000 ** 0.943 0.000 **
SSW 1.000 0.000 ** 1.000 0.000 **
PV(a) 0.994 0.000 1.000 0.000
Time to PV 0.899 0.015 ** 0.892 0.022 **
Age at PV 1.002 0.000 ** 1.002 0.000 **
Replacement rate 0.972 0.015 * 1.151 0.037 *
Minimum pension 1.391 0.050 ** 2.131 0.101 **
Months since elegible (log) 1.937 0.031 ** 1.554 0.037 **
BR (1000 € change) 1.002 0.000 ** 1.000 0.000 **
Unemployment rate 1.009 0.002 ** 1.018 0.004 **
Constant 0.000 0.000 ** 0.000 0.000 **
  1. (a)

    Base category: less than secondary.

  2. (b)

    **Significant at 5º% level.

  3. (c)

    *Significant at 10º% level.

Table B.1
Yearly wage estimations Dependent variable: yearly wage (full-time equivalent).
Men Coef Std. Err. Women Coef. Std. Err.
Past wage 0.516 0.000 ** 0.560 0.000 **
Age 802.42 1.783 ** 633.54 2.153 **
Age Sq. −5.097 0.022 ** −4.022 0.027 **
Immigrant −1846.89 9.804 ** −976.68 12.80 **
Secondary studies 1022.91 5.031 ** 1059.16 5.946 **
University studies 1686.27 8.564 ** 2366.83 8.063 **
Experience 0.042 0.000 ** 0.051 0.000 **
Experience Sq. 0.000 0.000 ** 0.000 0.000 **
Non-manual work 1503.31 4.943 ** 1360.39 5.698 **
Qualified work 3733.78 11.29 ** 3905.67 12.33 **
Year of birth 355.12 0.314 ** 279.10 0.401 **
Unemployment rate 27.13 0.459 ** 45.01 0.548 **
Constant −714479.50 629.37 ** −563384.90 803.22 **
  1. (a)

    Base category: less than secondary.

  2. (b)

    **Significant at 5º% level.

  3. (c)

    *Significant at 10º% level.

Table D.1
Unemployment probabilities for people older than 58 (Logit model).
Men Coef. Std. Err. Women Coef. Std. Err.
Coef. Std. Err. Coef. Std. Err.
Age 3.070 0.472 ** 0.675 0.386 *
Age Sq. −0.025 0.004 ** −0.006 0.003 *
Immigrant −0.574 0.062 ** −0.070 0.0780
Secondary studies −0.279 0.063 ** −0.146 0.066 **
University studies −1.704 0.395 * −1.516 0.476 **
Experience 0.011 0.006 * −0.018 0.005 **
Experience Sq. −0.000 0.000 * 0.000 0.000 **
Non-manual work −0.555 0.064 ** −0.208 0.050 **
Qualified work 0.439 0.385 0.437 0.460
Unemployment rate 0.080 0.004 ** 0.0230 0.004 **
Constant −94.45 14.599 ** −21.153 12.001 *
  1. (a)

    *Base category: less than secondary.

  2. (b)

    **Significant at 5º% level.

  3. (c)

    *Significant at 10º% level.

Table E.1
Retirement model 2005–2014 vs. 2005–2010.
Men Model 1 Model 2 Women Model 1 Model 2
Age 21.22 ** 43.08 ** 0.829 ** 77.87 **
Age Sq. 0.976 ** 0.972 ** – 0.968 **
Secondary studies 0.973 1.050 ** 0.857 1.142 **
University studies 1.152 ** 1.062 ** 0.932 1.271 **
First year retired 11.22 ** 2.042 ** 7.252 ** 2.545 **
Unemployed 0.656 ** 0.313 ** 0.692 ** 0.000
Unemployment benefit 0.156 ** 1.000 * 0.213 ** 1.000
Wage (1000 € change) 0.992 ** 0.994 ** 0.992 ** 0.994 **
PV(a) 0.953 ** 0.998 ** 0.899 ** 0.993 **
Time to max. pension 0.995 * 0.930 ** 1.002 0.968
Age at max. pension 1.000 * 1.000 1.000 1.000
Replacement rate 1.074 ** 1.146 ** 1.131 ** 1.199
Minimum pension 1.124 * 0.926 ** 1.438 ** 0.862 **
Months since eligible(log) 1.329 ** 2.627 ** 1.476 ** 3.182 **
Unemployment rate 1.012 ** 0.986 ** 1.012 * 0.991
Constant 5454.00 ** 0.000 ** 6453.00 ** 0.000 **
  1. (a)

    Base category: less than secondary.

  2. (b)

    **Significant at 5º% level.

  3. (c)

    *Significant at 10º% level.

  4. (d)

    Difference with respect to maximum pension, 1,000 € change.

Table E.2
Inclusion of disability.
Men Model 1 Model 2 Women Model 1 Model 2
Disability degree – – 0.993 ** – – 0.995
Dummy disability – – 0.751 ** – – 0.841
Age 43.08 ** 43.31 77.87 ** 78.16 **
Age Sq. 0.972 ** 0.972 ** 0.968 ** 0.968 **
Secondary studies 1.050 ** 1.049 * 1.142 ** 1.143 **
University studies 1.062 ** 1.061 * 1.271 ** 1.270 **
First year retired 2.042 ** 2.042 ** 2.545 ** 2.542 **
Unemployed 0.313 ** 0.315 ** 0.000 0.000
Unemployment benefit 1.000 * 1.000 * 1.000 1.000
Wage (1000 € change) 0.993 ** 0.993 ** 0.992 ** 0.992 **
PV(a) 0.994 ** 0.994 ** 0.993 ** 0.993 **
Time to max. pension 0.930 ** 0.930 ** 0.968 0.968
Age at max. pension 1.000 1.000 1.000 1.000
Replacement rate 1.146 ** 1.147 ** 1.199 1.200
Minimum pension 0.926 ** 0.926 ** 0.862 ** 0.862 **
Months since eligible(log) 2.627 ** 2.629 ** 3.182 ** 3.180 **
Unemployment rate 0.986 ** 0.986 ** 0.991 * 0.991
Constant 0.000 ** 0.000 ** 0.000 ** 0.000 **
  1. (a)

    Base category: less than secondary.

  2. (b)

    **Significant at 5º% level.

  3. (c)

    *Significant at 10º% level.

  4. (d)

    Difference with respect to maximum pension, 1,000 € change.

Table E.3
Inclusion of marriage/partnership.
Men Model 1 Model 2 Women Model 1 Model 2
Married/partnership – – 1.078 ** – – 1.005
Age 43.08 ** 44.05 ** 77.87 ** 70.42 **
Age Sq. 0.972 ** 0.972 ** 0.968 ** 0.968 **
Secondary studiesa 1.050 ** 1.061 ** 1.142 ** 1.131 **
University studies 1.062 ** 1.072 * 1.271 ** 1.265 **
First year retired 2.042 ** 2.059 ** 2.545 ** 2.415 **
Unemployed 0.313 ** 0.357 * 0.000 0.000
Unemployment benefit 1.000 * 1.000 * 1.000 1.000
Wage (100 € change) 0.994 ** 0.994 ** 0.993 ** 0.993 **
PV(a) 1.000 ** 1.000 ** 0.999 ** 0.999 **
Time to max. pension 0.930 ** 0.932 ** 0.968 0.984
Age at max. pension 0.993 0.994 0.994 0.994
Replacement rate 1.146 ** 1.140 ** 1.199 1.210
Minimum pension 0.926 ** 0.941 ** 0.862 ** 0.880 **
Months since eligible(log) 2.627 ** 2.716 ** 3.182 ** 3.058 **
Unemployment rate 0.986 ** 0.987 ** 0.991 0.999
Constant 0.000 ** 0.000 ** 0.000 ** 0.000 **
  1. (a)

    Base category: less than secondary.

  2. (b)

    **Significant at 5º% level.

  3. (c)

    *Significant at 10º% level.

  4. (d)

    Difference with respect to maximum pension, 1,000 € change.

Table F.1
Retirement decision (Probit model).
Men Coef. Std. Err. Women Coef. Std. Err.
Age 3.594 0.144 ** 3.554 0.183 **
Age Sq. −0.027 0.001 ** −0.027 0.001 **
Secondary studies 0.041 0.021 * 0.152 0.028 **
University studies −0.015 0.026 0.318 0.055 **
First year retired 0.834 0.055 ** 0.918 0.069 **
Unemployed −0.937 0.364 **
Unemployment benefit −0.000 0.000 *
Wage (100 € change) −0.000 0.000 ** −0.001 0.000 **
PV −0.000 0.000 ** −0.001 0.000 **
Time to max. pension −0.100 0.012 ** −0.064 0.017 **
Replacement rate 0.384 0.073 ** 0.267 0.133 **
Minimum pension −0.065 0.021 ** −0.163 0.027 **
Months since eligible(log) 0.928 0.064 ** 0.904 0.077 **
Unemployment rate −0.019 0.005 ** −0.016 0.007 **
Constant −118.203 4.682 ** −118.817 5.989 **
  1. (a)

    Base category: less than secondary.

  2. (b)

    **Significant at 5º% level.

  3. (c)

    *Significant at 10º% level.

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