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Technical Progress and Early Retirement

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Author Info
Ahituv, Avner
Zeira, Joseph

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Abstract

This Paper claims that technical progress induces early retirement of older workers. It supports this claim both theoretically and empirically. We present a model where part of human capital is technology-specific, so that technical progress erodes some existing human capital. This affects mostly older workers, who do not learn the new technology, since their career horizon is short. As a result their participation in the labour force declines. We find strong support to this erosion effect in US data, which shows that labour supply of older workers is negatively related to technical progress across sectors. Unlike the cross-section effect, the model is ambiguous about the aggregate effect of technical progress on labour participation of older workers. While in sectors with many innovations it falls due to erosion of human capital, in other sectors it increases due to higher wages. To examine which effect dominates, we run a time series test and find that the effect of average technical progress on aggregate labour force participation by the old is negative. Namely, the erosion effect dominates.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2614.

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Date of creation: Nov 2000
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Handle: RePEc:cpr:ceprdp:2614

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Related research
Keywords: Human Capital Labour Force Participation Technical Progress

Other versions of this item:

Find related papers by JEL classification:
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
O15 - Economic Development, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
O33 - Economic Development, Technological Change, and Growth - - Technological Change - - - Technological Change: Choices and Consequences; Diffusion Processes

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  1. Chari, V V & Hopenhayn, Hugo, 1991. "Vintage Human Capital, Growth, and the Diffusion of New Technology," Journal of Political Economy, University of Chicago Press, vol. 99(6), pages 1142-65, December. [Downloadable!] (restricted)
  2. Dale W. Jorgenson & Kevin J. Stiroh, 1999. "Information Technology and Growth," American Economic Review, American Economic Association, vol. 89(2), pages 109-115, May. [Downloadable!] (restricted)
  3. Leora Friedberg, 2003. "The impact of technological change on older workers: Evidence from data on computer use," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 56(3), pages 511-529, April.
  4. Aghion, Philippe & Howitt, Peter, 1994. "Growth and Unemployment," Review of Economic Studies, Blackwell Publishing, vol. 61(3), pages 477-94, July. [Downloadable!] (restricted)
    Other versions:
  5. repec:fth:harver:1487 is not listed on IDEAS
  6. Dale W. Jorgenson & Kevin J. Stiroh, 2000. "Raising the Speed Limit: US Economic Growth in the Information Age," OECD Economics Department Working Papers 261, OECD Economics Department. [Downloadable!]
    Other versions:
  7. Ashenfelter, Orley & Card, David, 2001. "Did the Elimination of Mandatory Retirement Affect Faculty Retirement Flows?," IZA Discussion Papers 402, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  8. Jordi Gali, 1999. "Technology, Employment, and the Business Cycle: Do Technology Shocks Explain Aggregate Fluctuations?," American Economic Review, American Economic Association, vol. 89(1), pages 249-271, March. [Downloadable!] (restricted)
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  9. 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. [Downloadable!] (restricted)
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  10. Feldstein, Martin S, 1974. "Social Security, Induced Retirement, and Aggregate Capital Accumulation," Journal of Political Economy, University of Chicago Press, vol. 82(5), pages 905-26, Sept./Oct. [Downloadable!] (restricted)
  11. Alan L. Gustman & Thomas L. Steinmeier, 2000. "Retirement Outcomes in the Health and Retirement Study," NBER Working Papers 7588, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  12. Blanchard, Olivier Jean & Quah, Danny, 1989. "The Dynamic Effects of Aggregate Demand and Supply Disturbances," American Economic Review, American Economic Association, vol. 79(4), pages 655-73, September. [Downloadable!] (restricted)
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  13. Oded Galor & Omer Moav, 2000. "Ability-Biased Technological Transition, Wage Inequality, And Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 115(2), pages 469-497, May. [Downloadable!] (restricted)
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  14. Ann P. Bartel & Nachum Sicherman, 1999. "Technological Change and Wages: An Interindustry Analysis," Journal of Political Economy, University of Chicago Press, vol. 107(2), pages 285-325, April. [Downloadable!] (restricted)
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  15. Peracchi, Franco & Welch, Finis, 1994. "Trends in Labor Force Transitions of Older Men and Women," Journal of Labor Economics, University of Chicago Press, vol. 12(2), pages 210-42, April. [Downloadable!] (restricted)
  16. Boucekkine, Raouf & de la Croix, David & Licandro, Omar, 2002. "Vintage Human Capital, Demographic Trends, and Endogenous Growth," Journal of Economic Theory, Elsevier, vol. 104(2), pages 340-375, June. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Andrea Ichino & Guido Schwerdt & Rudolf Winter-Ebmer & Josef Zweimüller, 2007. "Too Old to Work, Too Young to Retire?," IZA Discussion Papers 3110, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  2. Justina A.V. Fischer & Alfonso Sousa-Poza, 2006. "The Institutional Determinants of Early Retirement in Europe," University of St. Gallen Department of Economics working paper series 2006 2006-08, Department of Economics, University of St. Gallen. [Downloadable!]
  3. Schleife, Katrin, 2004. "Computer Use and the Employment Status of Older Workers : An Analysis Based on Individual Data," ZEW Discussion Papers 04-62, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
  4. Martin Debus & Jochen Michaelis, 2006. "Ausbildung, Erwerbsphase, Renteneintritt - demografischer Wandel und optimale Zeitallokation im Lebenszyklus," Discussion Papers in Economics 79/06, University of Kassel, Institute of Economics. [Downloadable!]
  5. Borghans,Lex & Weel,Bas,ter, 2002. "Do Older Workers Have More Trouble Using a Computer Than Younger Workers?," Research Memoranda 003, Maastricht : ROA, Researchcentrum voor Onderwijs en Arbeidsmarkt. [Downloadable!]
  6. Conde-Ruiz, José Ignacio & Galasso, Vincenzo, 2003. "The Macroeconomics of Early Retirement," CEPR Discussion Papers 3896, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  7. Torbjørn Hægeland, Dag Rønningen and Kjell G. Salvanes, 2007. "Adapt or withdraw? Evidence on technological changes and early retirement using matched worker-firm data," Discussion Papers 509, Research Department of Statistics Norway. [Downloadable!]
  8. Katrin Schleife, 2004. "Computer Use and the Employment Status of Older Workers - An Analysis Based on Individual Data," Darmstadt Discussion Papers in Economics 145, Institut für Volkswirtschaftslehre (Department of Economics), Technische Universität Darmstadt (Darmstadt University of Technology). [Downloadable!]
  9. Lutz Schneider, 2007. "Alterung und technologisches Innovationspotential : Eine Linked-Employer-Employee-Analyse," IWH Discussion Papers 2-07, Halle Institute for Economic Research. [Downloadable!]
  10. Claudio Michelacci & David Lopez-Salido, 2004. "Technology Shocks And Job Flows," Working Papers wp2004_05, CEMFI. [Downloadable!]
    Other versions:
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