Do Changes in Pension Incentives Affect Retirement? A Longitudinal Study of Subjective Retirement Expectations

This paper investigates the responsiveness of individuals retirement decisions to forward-looking measures of pension accumulations. In contrast to previous research, we use within-person variation in retirement incentives and are able to control for unobserved heterogeneity in tastes for retirement by studying a panel of subjective retirement expectations. We confirm that individuals do respond as expected to pension incentives, even when we control for individual fixed-effects. However, the magnitude of these responses differ when estimated from models based on within-person versus cross-sectional variation: the inclusion of fixed effects reduces the response by about half.