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Social Security and Earlier Retirement in Japan: Cross-Sectional Evidence

Abstract

The estimated elasticity of the probability of retirement with respect to social security retirement benefits declines as individuals age. The negative impact of social security retirement benefits on full-time workers is much greater than the impact on part-time workers for all age groups. Earnings test in Japan is, therefore, more effective on full-time workers than part-time workers among the elderly. Social security retirement benefits also provide the elderly with an incentive to prolong their unemployment status. The marginal effect of the market unemployment rate on full-time work is significantly larger than that on part-time work and both effects are negative. The e1asticit.y of retirement with respect to the market unemployment rate for those in their 60's is two to three times larger than those aged 70 and over. Retirement of those in their GO'S is quite responsive to changes in labor market condition.

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