The Low Employment Rate Conundrum. Can More Human Capital Help ?
AbstractMany EU countries are confronted with low employment rates, particularly among elderly workers. At the same time, levels of human capital are on the rise. Should this lift the age of retirement and lead to higher lifetime employment rates ? In order to explore these issues, we develop a simple model with endogenous retirement. It tells us that the impact of education on retirement is ambiguous. Higher wages encourage educated workers to postpone retirement (foregone effect). But higher wages allow faster wealth accumulation (income effect) which could favour early retirement. There is also that better educated individuals tend to be older when tehy enter the labour market. The general prediction is thus that, over their lifecycle, more educated individuals should not necessarily spend more years in employment. The econometric analysis of representative samples of 50+ males and females across various EU countries shows that educated individuals systematically retire later, suggesting that the foregone earnings effect dominates the income effect. Yet, the same data reveal that more educated individuals do not have higher lifetime employment rates. The benefit in terms of later retirement is not sufficient to offset later labour market entrance.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Université catholique de Louvain, Département des Sciences Economiques in its series Discussion Papers (ECON - Département des Sciences Economiques) with number 2005053.
Date of creation: 01 Nov 2005
Date of revision:
Endogenous retirement; Human Capital; employment rate;
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
This paper has been announced in the following NEP Reports:
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.:
- Edward C. Prescott, 2003.
"Why do Americans work so much more than Europeans?,"
321, Federal Reserve Bank of Minneapolis.
- Edward C. Prescott, 2004. "Why do Americans work so much more than Europeans?," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Jul, pages 2-13.
- Edward C. Prescott, 2004. "Why Do Americans Work So Much More Than Europeans?," Levine's Bibliography 122247000000000413, UCLA Department of Economics.
- Edward C. Prescott, 2004. "Why do Americans Work so Much More than Europeans?," NBER Working Papers 10316, National Bureau of Economic Research, Inc.
- Berkovec, James & Stern, Steven, 1991. "Job Exit Behavior of Older Men," Econometrica, Econometric Society, vol. 59(1), pages 189-210, January.
- Dahl, Svenn-Åge & Nilsen, Øivind Anti & Vaage, Kjell, 1999.
"Work or Retirement? Exit Routes for Norwegian Elderly,"
IZA Discussion Papers
32, Institute for the Study of Labor (IZA).
- Svenn-Age Dahl & Oivind Anti Nilsen & Kjell Vaage, 2000. "Work or retirement? Exit routes for Norwegian elderly," Applied Economics, Taylor & Francis Journals, vol. 32(14), pages 1865-1876.
- Dahl, S.-A., Nilsen, O.A. & Vaage, K., 2000. "Work or Retirement? Exit Routes for Norwegian Elderly," Norway; Department of Economics, University of Bergen 213, Department of Economics, University of Bergen.
- Sveinbjörn Blöndal & Stefano Scarpetta, 1999. "The Retirement Decision in OECD Countries," OECD Economics Department Working Papers 202, OECD Publishing.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Anne DAVISTER-LOGIST).
If references are entirely missing, you can add them using this form.