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01 Feb 2005

Pension Arrangements and Retirement Choices in Europe

A Comparison of the British, Danish and German Systems

James Sefton / Justin van de Ven / Martin Weale

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European Network of Economic Policy Research Institutes (ENEPRI) Research Report No. 5, 59 pages

This paper develops a general equilibrium simulation model of a heterogeneous population in which both consumption/saving and labour/leisure choices are endogenous. The authors use it to explore the effects of the different state benefit systems on the labour supply of old and older workers in Denmark, Germany and the UK. In broad terms, they find that differences in labour force participation can be accounted for by the differences in benefit structures. These conclusions are not altered when they allow for the effects of poor health at different ages. The UK system is found to be preferable by young persons while the German arrangement is preferred by old and older people (who make up the majority in the simulated population).