Hiring older employees: Do incentives of early retirement channels matter?
AbstractWe examine the impact of a Finnish reform in the 1990s that restricted the use of particular early retirement channels, unemployment pension and individual early retirement, and simultaneously changed the rules of firm size related experience rating in disability pensions. Our emphasis is on how the reforms affected the incentives of the firms to hire older employees. In a simple model we illustrate how forward-looking behaviour of firms affects the value of a new hire. Simulations with the model illustrate that although the reform in the unemployment pension in principle affected particular age groups, 53-54 year olds in the case of unemployment pension and 55-57 year olds in the case of individual early retirement, the impacts on hiring may have been felt also in other, younger, age groups. On the other hand, the effects of both reforms are likely to have varied by firm size. In a differences-indifferences-in-differences analysis with firm-level data we show that the impact of the reforms has been to increase the probability of hiring especially in the age group 51-52 and especially in the largest firms.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 30885.
Date of creation: Apr 2011
Date of revision:
early retirement; hiring; pension reform;
Find related papers by JEL classification:
- J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
- J63 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Turnover; Vacancies; Layoffs
- J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
This paper has been announced in the following NEP Reports:
- NEP-AGE-2011-05-24 (Economics of Ageing)
- NEP-ALL-2011-05-24 (All new papers)
- NEP-CMP-2011-05-24 (Computational Economics)
- NEP-LAB-2011-05-24 (Labour Economics)
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