Higher labour participation or more disability benefits – the results of the agent-based simulations of the retirement age increase in Poland

Pawel A. Strzelecki, Warsaw School of Economics

The increasing life expectancy force governments to adjust pension systems by increase of the limits of official retirement age. However the projection of the labour market effects of such changes on the basis of past data is usually difficult because of the lack of data about the behavior of persons in the situation of increased retirement age. The aim of this paper is an attempt to project the consequences of the increase of retirement age to 67 by the year 2040 in Poland. The use of the agent-based simulations allows to simulate individual decisions of persons in pre-retirement age about their labour force participation that takes into account individual information on future pension entitlements, health status, expected probability of finding job, possible wage level, expected pension level etc. Agent based model allows also different assumption about possible behavioral mechanisms. It can be assumed that persons will use all possible opportunities to obtain pre-retirement benefits and became inactive, but on the other hand the simulation of different life-course strategies of income optimization can be also applied. Simulation model can be also used to show to what extend the probable positive labour market effects of increasing life expectancy in good health can overcome the longer period of exposure to disability due to longer working life.