My first incursion in the field was the development (with Sergi Jiménez (UPF)) of a life-cycle model of optimal retirement in presence of life uncertainty. It has proved a very useful framework to analyze the impact of pension rules (eg minimum pensions, floor and ceilings in contributions, length of the averaging period in the pension formula, …) in retirement and life cycle savings and labor supply. Besides, it has provided a good model for explaining the basic empirical patterns of retirement in Spain:An evaluation of the life-cycle effects of minimum pensions on retirement behavior in Spain" (Journal of Applied Econometrics, 22 (2007) 923-950)
We did some previous groundwork on this topic with the help of the “retirement incentives” methodology:
I have mainly worked on the interactions between demographics and the pension system. With Virginia Sánchez (Universidad de Cantabria) we developed an stochastic OLG model to analyse the insurance effect of PAYG Defined Benefit pensions in presence of demographic shocks:Can Social Security be welfare improving in presence of demographic shocks? Journal of Economic Dynamics and Control , 30 (2006) p 1615-1646.
A crucial element for any serious debate of pension reform is a careful consideration of the incentives for early retirement. My main dissertation paper dealt with this issue in the context of a large scale OLG model with life uncertainty and a detailed reproduction of Spanish pension rules:Endogenous retirement and public pension reform in Spain Working Paper Universidad Pablo Olavide, Wp_ECON08.06
An OLG model with life uncertainty can be an extremely useful framework to analyze the future financial balance of pension systems and its redistributive impact (both within and between generations). As part of project FIPROS 2006/13 of the Spanish Social Security, Virginia Sánchez and I have enlarged the standard model (mentioned above) to include family behaviour and Survivial pensions. This goes a long way towards developing detailed models of the real-world pension systems, but still avoiding the daunting cost of a full Dynamic Programing algorithm. An executive summary (in Spanish) is available: here "Cambio demográfico y sistema de pensiones en España: Efectos redistributivos intra e inter-generacionales" The academic version "Demographic change, pension reform and redistribution in Spain" is a Working Paper of Universidad Pablo Olavide, Wp_ECON08.04
In 2008 we have focused on the interaction between pension and unemployment regulations (following previous research detailed below). The first outcome was the following report for the Spanish Social Security System FIPROS 2007/17 executive summary (in Spanish)
This work is with J.I García Pérez (UPO). It started with the financial support of Fundación Areces (Ayudas a la investigación en economía, 2004). We have explored the optimal labor supply decisions of unemployed workers of advanced age (near the legal retirement ages). The emphasis is on exploring the optimal individual responses to the incentives provide by the public regulations (unemployment benefits and pension rules). We (numerically) solved the dynamic, stochastic problem confronted by these individuals and compared the predictions with the Spanish evidence form Muestra Continua de vidas laborales . We find that current regulation makes it optimal to stay unemployed for a long period before claiming the public pension, in order to avoid the early retirement penalties. Logically, this weakens the incentives to accept job offers substantially. We propose some measures to provide better incentives to stay in the labor force.Social Security and the search behavior of workers approaching retirement May 2010 version (in evaluation)