Early Retirement, Social Security, and Output Gap

We analyze two social security reforms aimed at increasing working lifetimes. The rst reform elim- inates early retirement provisions, while the second increases both the age of early eligibility and the normal retirement age. We nd that although both reforms increase the participation rates of older workers, the elimination of early retirement provisions reduces future social security imbalances if ben- ets taken early are not reduced actuarially. Additionally, we nd that both reforms increase aggregate hours and output, although eciency gains derived from the elimination of the early retirement scheme are distant from previous estimates since labor supply could be less responsive. Finally, we also nd that the output gap brought about by the early retirement scheme may decrease in coming decades.