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The Interaction between Retirement and Job Search: A Global Approach to Older Workers Employment

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Author Info

  • Hairault, Jean-Olivier

    ()
    (University of Paris 1 Panthéon-Sorbonne)

  • Langot, François

    ()
    (University of Le Mans)

  • Sopraseuth, Thepthida

    ()
    (University of Cergy-Pontoise)

Abstract

This paper presents a theoretical foundation and empirical evidence in favor of the view that the tax on continued activity not only decreases the participation rate by inducing early retirement, but also badly affects the employment rate of older workers just before early retirement age. Countries with an early retirement age at 60 also have lower employment rates for old 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 retirement decisions. Using simulations, we show that the effective tax on continued activity caused by French social security system in conjunction with the generosity of unemployment benefits for older workers helps explain the low rate of employment just before the early retirement age. Decreasing this tax, thus bringing it closer to the actuarially-fair scheme, not only extends the retirement age, but also encourages a more intensive job-search by older unemployed workers.

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File URL: http://ftp.iza.org/dp1984.pdf
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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1984.

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Length: 40 pages
Date of creation: Feb 2006
Date of revision:
Publication status: published in: Journal of European Economic Association, 2010, 8(5), 1034-1076
Handle: RePEc:iza:izadps:dp1984

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Related research

Keywords: actuarial fairness; retirement; old workers; search;

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Citations

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Cited by:
  1. Jean-Olivier Hairault & Francois Langot & Arnaud Cheron, 2007. "Job creation and job destruction over the life cycle," 2007 Meeting Papers 431, Society for Economic Dynamics.
  2. Claudia Senik & Thierry Verdier, 2011. "Segregation, entrepreneurship and work values: the case of France," Journal of Population Economics, Springer, vol. 24(4), pages 1207-1234, October.
  3. Batyra, Anna & de la Croix, David & Pierrard, Olivier & Sneessens, Henri R., 2013. "Declining bargaining power of workers and the rise of early retirement in Europe," GIAM Working Papers 13-6, Galatasaray University Economic Research Center.
  4. Moreno-Galbis Eva & LANGOT Francois, 2008. "Does growth discriminates against older workers?," 2008 Meeting Papers 590, Society for Economic Dynamics.
  5. repec:hal:wpaper:halshs-00587718 is not listed on IDEAS
  6. Jean-Olivier Hairault & François Langot & Thepthida Sopraseuth, 2008. "Quantifying The Laffer Curve On The Continued Activity Tax In A Dynastic Framework," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(3), pages 755-797, 08.

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