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Labor Market Search and Optimal Retirement Policy

Author

Listed:
  • Joydeep Bhattacharya
  • Casey B. Mulligan
  • Robert R. Reed

Abstract

A popular and long-standing view is that social security is a means for young, unemployed people to "purchase" jobs from older workers. Can social security, by encouraging retirement and hence creating job vacancies for the young, improve the allocation of workers to jobs? Maybe, according to a standard model of labor market search, but public retirement programs currently pay the elderly substantially more than their jobs are worth. An important effect is that retirement reduces the value of other vacant jobs. Our results imply that recent reforms aimed at reducing retirement incentives are likely to improve labor market efficiency. (JEL J41, H55, J64, J26) Copyright 2004, Oxford University Press.

Suggested Citation

  • Joydeep Bhattacharya & Casey B. Mulligan & Robert R. Reed, 2004. "Labor Market Search and Optimal Retirement Policy," Economic Inquiry, Western Economic Association International, vol. 42(4), pages 560-571, October.
    • Handle: RePEc:oup:ecinqu:v:42:y:2004:i:4:p:560-571
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    References listed on IDEAS

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    1. Casey B. Mulligan, 2000. "Can Monopoly Unionism Explain Publicly Induced Retirement?," NBER Working Papers 7680, National Bureau of Economic Research, Inc.
    2. Jonathan Gruber & David A. Wise, 1999. "Social Security and Retirement around the World," NBER Books, National Bureau of Economic Research, Inc, number grub99-1, March.
    3. Mortensen, Dale T, 1982. "Property Rights and Efficiency in Mating, Racing, and Related Games," American Economic Review, American Economic Association, vol. 72(5), pages 968-979, December.
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    Citations

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    Cited by:

    1. Bhattacharya, Joydeep & Reed, Robert R., 2002. "Age-specific employment policies," ISU General Staff Papers 200211050800001187, Iowa State University, Department of Economics.
    2. Joydeep Bhattacharya & Robert R. Reed, 2006. "Social Security and Intergenerational Redistribution," Contributions to Economic Analysis, in: Structural Models of Wage and Employment Dynamics, pages 183-213, Emerald Group Publishing Limited.
    3. Bhattacharya, Joydeep & Reed, Robert, 2003. "A Positive Theory of the Income Redistributive Focus of Social Security," Staff General Research Papers Archive 10681, Iowa State University, Department of Economics.
    4. Hairault, Jean-Olivier & Langot, François & Zylberberg, André, 2015. "Equilibrium unemployment and retirement," European Economic Review, Elsevier, vol. 79(C), pages 37-58.
    5. Dai, Tiantian & Fan, Hua & Liu, Xiangbo & Ma, Chao, 2022. "Delayed retirement policy and unemployment rates," Journal of Macroeconomics, Elsevier, vol. 71(C).
    6. Mário Centeno & Márcio Corrêa, 2006. "Job Matching, Unexpected Obligations And Retirement Decisions," Anais do XXXIV Encontro Nacional de Economia [Proceedings of the 34th Brazilian Economics Meeting] 159, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    7. Marjan, MAES, 2008. "Does the dismantlement of early retirement schemes increase unemployment in Belgium ?," Discussion Papers (ECON - Département des Sciences Economiques) 2008041, Université catholique de Louvain, Département des Sciences Economiques.
    8. J. García-Pérez & Alfonso Sánchez-Martín, 2015. "Fostering job search among older workers: the case for pension reform," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-34, December.
    9. repec:fgv:epgrbe:v:66:n:4:a:5 is not listed on IDEAS
    10. Bhattacharya, Joydeep & Reed, Robert R., 2001. "Aging, unemployment, and welfare in a life-cycle model with costly labor market search," ISU General Staff Papers 200110010700001188, Iowa State University, Department of Economics.
    11. Coimbra, Leandro Willer P. & Ramos, Francisco de S., 2012. "Mecanismo de incentivo à renovação da mão-de-obra no mercado de trabalho face ao sistema previdenciário," Revista Brasileira de Economia - RBE, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil), vol. 66(4), December.

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    More about this item

    JEL classification:

    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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