Despite the increased frequency of job loss for older workers in Europe, little is known on its effect on the work-retirement decision. Employing individual data from the European Community Household Panel for Germany, Italy, Spain, and the U.K., a multivariate competing-risks hazard model is estimated in which the effect of job displacement is identified separately for transitions into re-employment and retirement. The findings suggest that in countries with institutional provisions for older unemployed which offer a pathway to early retirement such as, Germany and Spain, older displaced workers exhibit lower reemployment and higher retirement rates compared to the non-displaced. These results are robust to dynamic selection due to unobserved heterogeneity and to the endogeneity of displacement.
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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number
3069.