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Technical Progress and Early Retirement

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Author Info
Ahituv, Avner (Hebrew U of Jerusalem)
Zeira, Joseph (Hebrew U of Jerusalem, Harvard U and CEPR)

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Abstract

This paper claims that technical progress induces early retirement of older workers. It presents a model where human capital is technology specific, so that technical progress erodes some existing human capital. This affects mostly older workers, who have a smaller incentive to learn the new technology, since their career horizon is shorter. Hence, they tend to work less. We find support to this erosion effect in HRS data, which shows that retirement and unemployment of older workers are positively related to technical progress in their sectors. Unlike the effect across sectors, the model is ambiguous about the aggregate effect of technical progress on labor supply of older workers. While in sectors with many innovations it falls due to the erosion effect, in other sectors it increases due to higher wages. To examine which effect dominates we run a time series test using US data and find that the rate of average technical progress reduces aggregate labor force participation by the old. Namely, the erosion effect dominates.

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Paper provided by Harvard University, John F. Kennedy School of Government in its series Working Paper Series with number rwp02-007.

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Date of creation: Feb 2002
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Handle: RePEc:ecl:harjfk:rwp02-007

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  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!]
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  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!]
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  8. Elhanan Helpman & Manuel Trajtenberg, 1994. "A Time to Sow and a Time to Reap: Growth Based on General Purpose Technologies," NBER Working Papers 4854, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  9. 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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  10. 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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  11. Courtney Coile & Jonathan Gruber, 2000. "Social Security and Retirement," NBER Working Papers 7830, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  15. 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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  16. 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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  17. 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)
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  19. Cooley, Thomas F. & Dwyer, Mark, 1998. "Business cycle analysis without much theory A look at structural VARs," Journal of Econometrics, Elsevier, vol. 83(1-2), pages 57-88. [Downloadable!] (restricted)
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  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. Vegard Skirbekk, 2003. "Age and individual productivity: a literature survey," MPIDR Working Papers WP-2003-028, Max Planck Institute for Demographic Research, Rostock, Germany. [Downloadable!]
  3. Vegard Skirbekk, 2004. "Age and Individual Productivity: A Literature Survey," Vienna Yearbook of Population Research, Vienna Institute of Demography (VID) of the Austrian Academy of Sciences in Vienna, vol. 1(1), pages 133-153. [Downloadable!]
  4. 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!]
  5. 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!]
  6. 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!]
  7. Lutz Schneider, 2007. "Alterung und technologisches Innovationspotential : Eine Linked-Employer-Employee-Analyse," IWH Discussion Papers 2-07, Halle Institute for Economic Research. [Downloadable!]
  8. 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!]
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  9. Matteo Bassi, 2008. "An Egg Today and a Chicken Tomorrow: A Model of Social Security with Quasi-Hyperbolic Discounting," CSEF Working Papers 205, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy. [Downloadable!]
  10. Borghans,Lex & Weel,Bas,ter, 2002. "Do Older Workers Have More Trouble Using a Computer Than Younger Workers?," Research Memoranda 003, Maastricht : ROA, Research Centre for Education and the Labour Market. [Downloadable!]
  11. Conde-Ruiz, José Ignacio & Galasso, Vincenzo, 2003. "The Macroeconomics of Early Retirement," CEPR Discussion Papers 3896, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  12. 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!]
  13. Claudio Michelacci & David Lopez-Salido, 2004. "Technology Shocks And Job Flows," Working Papers wp2004_05, CEMFI. [Downloadable!]
    Other versions:
  14. Langot, François & Moreno-Galbis, Eva, 2008. "Does the Growth Process Discriminate against Older Workers?," IZA Discussion Papers 3841, Institute for the Study of Labor (IZA). [Downloadable!]
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