Pension systems and labour market participation in European countries

Many countries all over the world have been facing the problem of deteriorating demographics, forcing reforms of the pension system model as well as its main parameters. An important perspective of the assessment of the financial sustainability of a pension system is the division of current GDP among generations. This results from the macroeconomic rules that determine the pension system functioning. The main factor affecting the sustainability and, therefore, the income adequacy of pensioners in the long run is the relationship between the pension system and the labour market. The timing of retirement determines the border between the working age generation and the generation of pensioners. In this chapter, the author attempts to answer the research question whether empirical data covering European countries confirm that there is a linkage between pension systems design or their selected parameters and the condition of labour markets. This question seems to be crucial for policymakers, especially in countries refraining from a systematic increase in the retirement age or that are even planning to decrease it. The method employed to analyse empirical data is mainly based on selected statistical as well as econometric tools.