Can Policy Facilitate Partial Retirement? Evidence from a Natural Experiment in Germany

Abstract

In 1996, Germany introduced the Altersteilzeit (ATZ) policy, which provided incentives for partial retirement. Using linked establishment survey and administrative employment data, the authors estimate changes in part-time employment rates and retirement after ATZ. Among men, part-time work increased and retirements were postponed by at least 0.6 years without any displacement of full-time work. For women, the increases in working lives appeared to be even larger. These estimates are based on a nationally representative sample of firms. When analysis is restricted to a subset of firms with collective agreements covering partial retirement, and when the staggered timing of those agreements is used to identify estimates, the authors find extensions of working life of more than 1 year. Overall, these findings suggest that policies encouraging partial retirement may have potential for increasing the duration of working life.