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workforce aging, pension reforms, and firm outcomes

Author

Listed:
  • Francesca Carta

    (Bank of Italy)

  • Francesco D'Amuri

    (Bank of Italy)

  • Till von Wachter

    (University of California Los Angeles)

Abstract

Raising statutory retirement ages has been a popular policy to increase the labor supply of older workers in the face of population aging. In this paper, we quantify the effect of a sharp and unexpected increase in retirement ages on firms’ input mix and economic outcomes using Italian administrative and survey data on employment, wages, value added and capital. Exploiting information on lifetime pension contributions for the universe of employees, we are able to quantify the extra number of older workers employed by each firm as a result of the reform. We find that a 10 per cent increase in older workers implies a rise in employment of young and middle-aged workers of 1.8 per cent and 1.3 per cent, respectively. Total labor costs and value added increase broadly in line with employment, with little impact on labor productivity and unit labor costs. These results suggest older workers are valuable to employers and that pension reforms postponing retirement can remove a constraint rather than place a burden on firms.

Suggested Citation

  • Francesca Carta & Francesco D'Amuri & Till von Wachter, 2020. "workforce aging, pension reforms, and firm outcomes," Temi di discussione (Economic working papers) 1297, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:wptemi:td_1297_20
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    File URL: https://www.bancaditalia.it/pubblicazioni/temi-discussione/2020/2020-1297/en_tema-1297.pdf
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    Cited by:

    1. Tito Boeri & Pietro Garibaldi & Espen R. Moen, 2022. "In medio stat victus: Labor Demand Effects of an Increase in the Retirement Age," Journal of Population Economics, Springer;European Society for Population Economics, vol. 35(2), pages 519-556, April.
    2. D’Amuri, Francesco & De Philippis, Marta & Guglielminetti, Elisa & Lo Bello, Salvatore, 2022. "Slack and prices during Covid-19: Accounting for labor market participation," Labour Economics, Elsevier, vol. 75(C).
    3. Francesco D'Amuri & Marta De Philippis & Elisa Guglielminetti & Salvatore Lo Bello, 2021. "Natural unemployment and activity rates: flow-based determinants and implications for price dynamics," Questioni di Economia e Finanza (Occasional Papers) 599, Bank of Italy, Economic Research and International Relations Area.
    4. Davide Dottori & Francesca Modena & Giulia Martina Tanzi, 2023. "Measuring peer effects in parental leaves: evidence from a reform," Temi di discussione (Economic working papers) 1399, Bank of Italy, Economic Research and International Relations Area.
    5. Diego Daruich & Sabrina Di Addario & Raffaele Saggio, 2023. "The Effects of Partial Employment Protection Reforms: Evidence from Italy," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 90(6), pages 2880-2942.
    6. Lucia Rizzica, 2020. "The Italian public sector workforce: recent evolution in the light of the rules on turnover," Questioni di Economia e Finanza (Occasional Papers) 560, Bank of Italy, Economic Research and International Relations Area.
    7. Hernæs, Erik & Kornstad, Tom & Markussen, Simen & Røed, Knut, 2023. "Ageing and labor productivity," Labour Economics, Elsevier, vol. 82(C).
    8. Rutten, Albert & van Vuuren, Daniël & Knoef, Marike, 2022. "Employment Effects of Incentivized Gradual Retirement Plans," Other publications TiSEM 37eba9e7-b6ff-4f31-9c42-3, Tilburg University, School of Economics and Management.

    More about this item

    Keywords

    pension reform; wages; firms and labor market outcomes;
    All these keywords.

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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