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Youth Unemployment and Retirement of the Elderly: The Case of Italy

In: Social Security Programs and Retirement around the World: The Relationship to Youth Employment

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  • Agar Brugiavini
  • Franco Peracchi

Abstract

This paper shows that the “lump of labor” assumption fails in Italy. The direct relationship between the unemployment rate of the young and the labor force participation of the old is pro-cyclical, i.e. a higher labor force participation of the old is related to a lower unemployment rate of the young. Hence both vary with the business cycle. In order to overcome endogeneity problems in explaining unemployment of the young, we resort to a simulated variable: “the inducement to retire”, which is constructed by simulating the social security benefits. We related the unemployment rate of the young to this incentive measure and find that a higher inducement to retire is associated to a higher unemployment rate – quite the opposite of the “young-in-old-out” story.

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This chapter was published in:

  • Jonathan Gruber & David A. Wise, 2010. "Social Security Programs and Retirement around the World: The Relationship to Youth Employment," NBER Books, National Bureau of Economic Research, Inc, number grub08-1, May.
    This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 8256.

    Handle: RePEc:nbr:nberch:8256

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    References

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    1. Tito Boeri & Pietro Garibaldi, 2007. "Two Tier Reforms of Employment Protection: a Honeymoon Effect?," Economic Journal, Royal Economic Society, vol. 117(521), pages 357-385, 06.
    2. Agar Brugiavini & Franco Peracchi, 2005. "Fiscal Implications of Pension Reforms in Italy," CEIS Research Paper 67, Tor Vergata University, CEIS.
    3. Agar Brugiavini & Franco Peracchi, 2004. "Micro-Modeling of Retirement Behavior in Italy," NBER Chapters, in: Social Security Programs and Retirement around the World: Micro-Estimation, pages 345-398 National Bureau of Economic Research, Inc.
    4. Graziella Caselli & Franco Peracchi & Elisabetta Barbi & Rosa Maria Lipsi, 2003. "Differential Mortality and the Design of the Italian System of Public Pensions," LABOUR, CEIS, vol. 17(SpecialIs), pages 45-78, 08.
    5. Floro Ernesto Caroleo & Fernanda Mazzotta, 1998. "Youth Unemployment and Youth Employment Policies in Italy," CELPE Discussion Papers 45, CELPE - Centre of Labour Economics and Economic Policy, University of Salerno, Italy.
    6. Bentolila, Samuel & Bertola, Giuseppe, 1990. "Firing Costs and Labour Demand: How Bad Is Eurosclerosis?," Review of Economic Studies, Wiley Blackwell, vol. 57(3), pages 381-402, July.
    7. Bertola, Giuseppe, 1990. "Job security, employment and wages," European Economic Review, Elsevier, vol. 34(4), pages 851-879, June.
    8. Agar Brugiavini & Franco Peracchi, 2003. "Social Security Wealth and Retirement Decisions in Italy," LABOUR, CEIS, vol. 17(SpecialIs), pages 79-114, 08.
    9. Michele Boldrin & Juan J. Dolado & Juan F. Jimeno & Franco Peracchi, 1999. "The future of pensions in Europe," Economic Policy, CEPR & CES & MSH, vol. 14(29), pages 287-320, October.
    10. Gruber, Jonathan & Wise, David A. (ed.), 2004. "Social Security Programs and Retirement around the World," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226310183, янваÑ.
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    Cited by:
    1. Murrugarra, Edmundo, 2011. "Employability and productivity among older workers : apolicy framework and evidence from Latin America," Social Protection Discussion Papers 63230, The World Bank.
    2. Caroleo, Floro Ernesto, 2012. "Il difficile passaggio verso il lavoro dei giovani che lasciano la scuola: quali possibili politiche?
      [The hard access to the labour market of youth leaving school: what policy choices?]
      ," MPRA Paper 37645, University Library of Munich, Germany.

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