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Too Old to Work, Too Young to Retire?

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  • Ichino, Andrea
  • Schwerdt, Guido
  • Winter-Ebmer, Rudolf
  • Zweimüller, Josef

Abstract

We use firm closure data from social security records for Austria 1978-1998 to investigate the effect of age on employment prospects. We rely on exact matching to compare workers displaced due to firm closure with similar non-displaced workers. We then use a difference-in-difference strategy to analyze employment and earnings of older relative to prime-age workers in the displacement and non-displacement groups. Results suggest that immediately after plant closure the old have lower re-employment probabilities as compared to prime-age workers but later they catch up. While among the young the employment prospects of the displaced remain persistently different from those of the non-displaced, among the old the effect of displacement fades away, and actually disappears even immediately after plant closure when the effect of tenure based severance payment is controlled for. Our evidence suggests that increasing the retirement age does not necessarily produce individuals who are “too old to work but too young to retire”.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6510.

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Date of creation: Oct 2007
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Handle: RePEc:cpr:ceprdp:6510

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Keywords: Aging; Employability; Matching; Plant Closures;

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References

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  1. Ruhm, Christopher J, 1991. "Are Workers Permanently Scarred by Job Displacements?," American Economic Review, American Economic Association, vol. 81(1), pages 319-24, March.
  2. Francesco Daveri & Mika Maliranta, 2007. "Age, seniority and labour costs: lessons from the Finnish IT revolution," Economic Policy, CEPR & CES & MSH, vol. 22, pages 117-175, 01.
  3. Sharon M. Oster & Daniel S. Hamermesh, 1998. "Aging And Productivity Among Economists," The Review of Economics and Statistics, MIT Press, vol. 80(1), pages 154-156, February.
  4. Schwerdt, Guido, 2011. "Labor turnover before plant closure: "Leaving the sinking ship" vs. "Captain throwing ballast overboard"," Labour Economics, Elsevier, vol. 18(1), pages 93-101, January.
  5. Bartel, Ann P & Sicherman, Nachum, 1993. "Technological Change and Retirement Decisions of Older Workers," Journal of Labor Economics, University of Chicago Press, vol. 11(1), pages 162-83, January.
  6. Jacobson, Louis S & LaLonde, Robert J & Sullivan, Daniel G, 1993. "Earnings Losses of Displaced Workers," American Economic Review, American Economic Association, vol. 83(4), pages 685-709, September.
  7. Card, David & Sullivan, Daniel G, 1988. "Measuring the Effect of Subsidized Training Programs on Movements in and out of Employment," Econometrica, Econometric Society, vol. 56(3), pages 497-530, May.
  8. repec:bla:restud:v:73:y:2006:i:4:p:1009-1038 is not listed on IDEAS
  9. Lazear, Edward P, 1979. "Why Is There Mandatory Retirement?," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1261-84, December.
  10. David Card & Raj Chetty & Andrea Weber, 2006. "Cash-on-Hand and Competing Models of Intertemporal Behavior: New Evidence from the Labor Market," NBER Working Papers 12639, National Bureau of Economic Research, Inc.
  11. Vegard Skirbekk, 2003. "Age and individual productivity: a literature survey," MPIDR Working Papers WP-2003-028, Max Planck Institute for Demographic Research, Rostock, Germany.
  12. Avner Ahituv & Joseph Zeira, 2011. "Technical Progress and Early Retirement," Economic Journal, Royal Economic Society, vol. 121(551), pages 171-193, March.
  13. Judith K. Hellerstein & David Neumark, 2004. "Production Function and Wage Equation Estimation with Heterogeneous Labor: Evidence from a New Matched Employer-Employee Data Set," NBER Working Papers 10325, National Bureau of Economic Research, Inc.
  14. Julia I. Lane & John C. Haltiwanger & James Spletzer, 1999. "Productivity Differences across Employers: The Roles of Employer Size, Age, and Human Capital," American Economic Review, American Economic Association, vol. 89(2), pages 94-98, May.
  15. Stevens, Ann Huff, 1997. "Persistent Effects of Job Displacement: The Importance of Multiple Job Losses," Journal of Labor Economics, University of Chicago Press, vol. 15(1), pages 165-88, January.
  16. Chan, Sewin & Stevens, Ann Huff, 2001. "Job Loss and Employment Patterns of Older Workers," Journal of Labor Economics, University of Chicago Press, vol. 19(2), pages 484-521, April.
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