Behavioral responses to public pension cuts : evidence from the Greek financial crisis

Abstract

The austerity measures that were adopted in the 2010-2015 period in response to the Greek αnancial crisis included cutbacks in the public sector on a scale that has rarely been seen in other nations. Pensions for those receiving beneαts were cut by up to 50.1% and monthly salaries for public sector employees were reduced substantially. Most of the analysis of these reforms has focused on the macroeconomic effects on the government budget. This project uses data from household budget surveys to assess the effects of these cutbacks on individuals approaching retirement as well as those who had retired under the prior system. I find that both income and consumption of households with higher initial earnings decreased disproportionately more than those with lower earnings, in line with the austerity measures implemented. I also find that the income changes were negatively correlated with mortality rates.