Economic Papers

are written by the Staff of the Directorate-General for Economic and FinancialAffairs, or by experts working in association with them. The Papers are intended to increase awarenessof the technical work being done by staff and to seek comments and suggestions for further analysis.The views expressed are the author’s alone and do not necessarily correspond to those of the EuropeanCommission. Comments and enquiries should be addressed to:European CommissionDirectorate-General for Economic and Financial AffairsPublicationsB-1049 BrusselsBelgiumE-mail: Ecfin-Info@ec.europa.euThis paper exists in English only and can be downloaded from the websitehttp://ec.europa.eu/economy_finance/publications A great deal of additional information is available on the Internet. It can be accessed through theEuropa server (http://europa.eu)KC-AI-09-385-EN-NISSN 1725-3187ISBN 978-92-79-13360-2DOI 10.2765/28805© European Communities, 2009

Assessing the short-term impact of pension reforms on older workers' participationrates in the EU: a diff-in-diff approach Alfonso Arpaia** - Kamil Dybczak *- Fabiana Pierini*

′

Introduction

The performance of the European labour markets improved significantly during the second half of the 1990s (AER 2003). After having reached a peak in 1994, the unemployment rate startedgradually to decline while both the employment and the participation rates kept rising. Withincreases of more than 8 and 7 percentage points, respectively for the employment and theparticipation rates, the female and the older workers were the most dynamic components. Theseimprovements reflect long-term changes in the socio-economic behaviour such as a differentattitude toward female employment and participation, improved health and working conditions which induce to retire at older ages. Yet, they took place in response to the reforms implementedduring the period (e.g. ECB, 2007). The last decade witnessed important changes in Europeanpension systems. Up to 1995, only few countries implemented pension reforms. By 2006, almostevery European country had enacted reforms of the pension system. This richness of reformsacross countries and time of their occurrence can be used to conduct a "policy experiment" of the effects of pension reforms on the participation rates of people aged between 50 and 64 years.Each policy intervention is considered as a discrete event that occurred at a specific time for eachcountry. The event-study compares the value of one variable of interest after a certain reform orlegislation has taken place with its value before such change has occurred. To control for otherdeterminants not related to specific policy interventions, the findings of before-after comparisonare compared with a control group made of those countries which did not implement a reform atleast in one year covered by the sample period. With the event-study approach we will verify

** DG ECFIN, European Commission and IZA . * DG ECFIN, European Commission.An early version of this paper was presented at the 11

Banca d'Italia workshop on Public Finance

Pension Reform,Fiscal Policy and Economic Performance

, Perugia S.A.DI.B.A.26-28 March 2009. Wehave benefited from comments by conference participants, we would like to thank Lukas Reiss, in particular. The analysis and conclusions set forth are those of the authors and do not indicateconcurrence by other members of the European Commission.