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Impact of Early Retirement Incentives on Labour Market Participation: Evidence from a Parametric Change in the Czech Republic

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  • David Kocourek
  • Filip Pertold

Abstract

We investigate the impact of a change in the Czech early retirement scheme on the labor force participation of older male workers. Using the difference-in-differences method we find that a reduction in early retirement benefits by 2–3% leads to approximately the same decrease in the probability of being inactive. Our finding implies high elasticity of older male workers’ participation rate. The public policy implication is that a reduction in early retirement benefits can serve as a very effective tool to increase the participation of older men in the Czech labor market.

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Bibliographic Info

Paper provided by Czech National Bank, Research Department in its series Working Papers with number 2009/7.

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Date of creation: Dec 2009
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Handle: RePEc:cnb:wpaper:2009/7

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Keywords: Czech Republic; early retirement; labor market participation.;

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  1. Brinch, Christian & Hernæs, Erik & Strøm, Steinar, 2002. "Labour Supply Effects of an Early Retirement Programme," Memorandum 33/2001, Oslo University, Department of Economics.
  2. Krueger, Alan B & Pischke, Jorn-Steffen, 1992. "The Effect of Social Security on Labor Supply: A Cohort Analysis of the Notch Generation," Journal of Labor Economics, University of Chicago Press, vol. 10(4), pages 412-37, October.
  3. Stock, James H & Wise, David A, 1990. "Pensions, the Option Value of Work, and Retirement," Econometrica, Econometric Society, vol. 58(5), pages 1151-80, September.
  4. Kamil Galuscak, 2001. "Retirement Decisions of Older Czech Male Workers," CERGE-EI Working Papers wp190, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
  5. Jonathan Gruber & David A. Wise, 2004. "Social Security Programs and Retirement around the World: Micro-Estimation," NBER Books, National Bureau of Economic Research, Inc, number grub04-1.
  6. Baker, Michael & Benjamin, Dwayne, 1999. "Early Retirement Provisions and the Labor Force Behavior of Older Men: Evidence from Canada," Journal of Labor Economics, University of Chicago Press, vol. 17(4), pages 724-56, October.
  7. Courtney Coile & Jonathan Gruber, 2007. "Future Social Security Entitlements and the Retirement Decision," The Review of Economics and Statistics, MIT Press, vol. 89(2), pages 234-246, May.
  8. Borsch-Supan, Axel, 2000. "Incentive effects of social security on labor force participation: evidence in Germany and across Europe," Journal of Public Economics, Elsevier, vol. 78(1-2), pages 25-49, October.
  9. Jan Babecky & Kamil Dybczak, 2009. "The Impact of Population Ageing on the Czech Economy," Working Papers 2009/1, Czech National Bank, Research Department.
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