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Distance to Retirement and The Job Search of Older Workers: The Case For Delaying Retirement Age

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Author Info

  • Jean-Olivier Hairault

    (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, IZA - Institute for the Study of Labor)

  • François Langot

    (IZA - Institute for the Study of Labor, GAINS-TEPP - Université du Maine, CEPREMAP - Centre pour la recherche économique et ses applications - Centre pour la recherche économique et ses applications)

  • Thepthida Sopraseuth

    (GAINS-TEPP - Université du Maine)

Abstract

This paper presents a theoretical foundation and empirical evidence in favor of the view that the retirement age decision impacts on the employment of older workers before this age. Countries with a retirement age at 60 are indeed characterized by lower employment rates for workers aged 55-59. Based on the French Labor Force Survey, we show that the likelihood of employment is significantly affected by the distance from retirement, in addition to age and other relevant variables. We then extend McCall's (1970) job search model by explicitly integrating life-cycle features and the retirement decision. Using simulations, we show that the distance effect in conjunction with the generosity of unemployment benefits for older workers explains the low rate of employment just before the eligibility retirement age. Finally, we show that implementing actuarially-fair schemes, not only extends the retirement age, but also encourages a more intensive job-search by older unemployed workers.

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Bibliographic Info

Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number hal-00517107.

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Date of creation: 01 Sep 2010
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Publication status: Published, Journal of the European Economic Association, 2010, 8, 5, 1034-1076
Handle: RePEc:hal:cesptp:hal-00517107

Note: View the original document on HAL open archive server: http://hal.archives-ouvertes.fr/hal-00517107
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Related research

Keywords: Job Search; Older Workers; Retirement;

References

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  1. Seater, John J., 1977. "A unified model of consumption, labor supply, and job search," Journal of Economic Theory, Elsevier, Elsevier, vol. 14(2), pages 349-372, April.
  2. Ana Castaneda & Javier Diaz-Gimenez & Jose-Victor Rios-Rull, 2003. "Accounting for the U.S. Earnings and Wealth Inequality," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 111(4), pages 818-857, August.
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Citations

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Cited by:
  1. Hairault, Jean-Olivier & Langot, François & Ménard, Sébastien & Sopraseuth, Thepthida, 2009. "Optimal Unemployment Insurance for Older Workers," IZA Discussion Papers 4071, Institute for the Study of Labor (IZA).
  2. 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).
  3. Alfonso R. Sánchez & J. Ignacio García-Pérez & Sergi Jiménez-Martín, 2014. "Delaying the normal and early retirement ages in Spain: behavioural and welfare consequences for employed and unemployed workers," Economics Working Papers, Department of Economics and Business, Universitat Pompeu Fabra 1422, Department of Economics and Business, Universitat Pompeu Fabra.
  4. Jean-Olivier Hairault & François Langot & Thepthida Sopraseuth, 2009. "Le faible taux d'emploi des seniors," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers), HAL hal-00517121, HAL.
  5. Jean-Olivier Hairault & François Langot & Sébastien Ménard & Thepthida Sopraseuth, 2012. "Optimal Unemployment Insurance for Older Workers," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers), HAL hal-00668989, HAL.
  6. Matthias Giesecke, 2014. "Actuarial Adjustments, Retirement Behaviour and Worker Heterogeneity," Ruhr Economic Papers, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen 0490, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  7. Bi, Sheng & Langot, François, 2014. "Search and Retirement under Asymmetric Information," IZA Discussion Papers 8288, Institute for the Study of Labor (IZA).
  8. Holger Lüthen, 2014. "Rates of Return and Early Retirement Disincentives: Evidence from a German Pension Reform," Discussion Papers of DIW Berlin 1389, DIW Berlin, German Institute for Economic Research.

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