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Old before their time: the role of employers in retirement decisions

Author

Listed:
  • Piera Bello

    (Università della Svizzera italiana
    University College London)

  • Vincenzo Galasso

    (Università Bocconi
    Baffi-CAREFIN
    IGIER
    CEPR)

Abstract

Do elderly workers retire early voluntarily, or are they induced to retire by their employers? We consider an exogenous shock due to a trade agreement between Switzerland and the EU—the mutual recognition agreement (MRA), which improved access to the EU market for Swiss firms. A vast literature suggests that these trade liberalization episodes lead firms to relocate and to innovate in order to increase productivity. This may lead to lower demand of skill obsolescent elderly workers and to higher demand of skilled workers. We use a difference in differences approach on Swiss Labor Force Survey data to compare early retirement behavior in treated MRA and control (non-MRA) industries in three periods (pre-liberalization, announcement, and implementation). We find an increase in early retirement in the MRA sector during the announcement period, which is stronger for larger firms, for exporting firms and for firms with a large age wage gap. We also find an increase in the share of graduates in all age groups. Wages are largely unaffected.

Suggested Citation

  • Piera Bello & Vincenzo Galasso, 2020. "Old before their time: the role of employers in retirement decisions," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 27(5), pages 1198-1223, October.
    • Handle: RePEc:kap:itaxpf:v:27:y:2020:i:5:d:10.1007_s10797-020-09593-7
    DOI: 10.1007/s10797-020-09593-7
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    1. Frimmel, Wolfgang & Horvath, Thomas & Schnalzenberger, Mario & Winter-Ebmer, Rudolf, 2018. "Seniority wages and the role of firms in retirement," Journal of Public Economics, Elsevier, vol. 164(C), pages 19-32.

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    More about this item

    Keywords

    Early retirement; Firms restructuring; Labor demand of elderly workers;
    All these keywords.

    JEL classification:

    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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