The Social Multiplier of Pension Reform

Abstract

We study how social forces in families, neighborhoods and workplaces shape retirement behavior. To estimate causal retirement spillovers between individuals, we exploit a pension reform in the Netherlands that creates exogenous variation in peers' retirement ages, and we use administrative data on the full Dutch population. We find large spillovers in couples, primarily due to women reacting to their husband's retirement choices. Average spillovers among siblings, neighbors, and coworkers are modest; however, consistent with homophily in social interactions, sizable effects arise between similar individuals in these groups. Additional evidence suggests both leisure complementarities and the transmission of social norms as mechanisms behind retirement spillovers. Our findings imply that pension reforms have a large social multiplier, amplifying their overall impact on retirement behavior by at least 42%.