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Hiring older employees: Do incentives of early retirement channels matter?

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  • Ilmakunnas, Pekka
  • Ilmakunnas, Seija

Abstract

We 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 Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 30885.

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Date of creation: Apr 2011
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Handle: RePEc:pra:mprapa:30885

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Keywords: early retirement; hiring; pension reform;

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References

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  1. Saint-Paul, Gilles, 2010. "Does the welfare state make older workers unemployable?," CEPREMAP Working Papers (Docweb) 1003, CEPREMAP.
  2. Luc BEHAGHEL, 2007. "La protection de l'emploi des travailleurs Âgés en France : une étude de la contribution Delalande," Annales d'Economie et de Statistique, ENSAE, issue 85, pages 41-80.
  3. Martins, Pedro S. & Novo, Alvaro A. & Portugal, Pedro, 2009. "Increasing the Legal Retirement Age: The Impact on Wages, Worker Flows and Firm Performance," IZA Discussion Papers 4187, Institute for the Study of Labor (IZA).
  4. Ammermüller, Andreas & Zwick, Thomas & Boockmann, Bernhard & Maier, Michael, 2007. "Do hiring subsidies reduce unemployment among the elderly? Evidence from two natural experiments," ZEW Discussion Papers 07-001, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  5. Jean-Olivier Hairault & Francois Langot & Thepthida Sopraseuth, 2010. "Distance to Retirement and Older Workers' Employment: The Case for Delaying the Retirement Age," Journal of the European Economic Association, MIT Press, vol. 8(5), pages 1034-1076, 09.
  6. Frank A. Scott & John Garen & Mark Berger, 1995. "Do health insurance and pension costs reduce the job opportunities of older workers?," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 48(4), pages 775-791, July.
  7. Tomi Kyyrä & Ralf Wilke, 2004. "Reduction in the Long-Term Unemployment of the Elderly: A Success Story from Finland," Discussion Papers 346, Government Institute for Economic Research Finland (VATT).
  8. Seija Ilmakunnas & Mervi Takala, 2005. "Promoting Employment among Ageing Workers: Lessons from Successful Policy Changes in Finland," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan, vol. 30(4), pages 674-692, October.
  9. Luojia Hu, 2003. "The hiring decisions and compensation structures of large firms," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 56(4), pages 663-681, July.
  10. Heywood, John S. & Siebert, W. Stanley, 2009. "Understanding the Labour Market for Older Workers: A Survey," IZA Discussion Papers 4033, Institute for the Study of Labor (IZA).
  11. Behaghel, Luc & Crépon, Bruno & Sédillot, Béatrice, 2008. "The perverse effects of partial employment protection reform: The case of French older workers," Journal of Public Economics, Elsevier, vol. 92(3-4), pages 696-721, April.
  12. Adams, Scott J., 2004. "Age discrimination legislation and the employment of older workers," Labour Economics, Elsevier, vol. 11(2), pages 219-241, April.
  13. Scott J. Adams & John S. Heywood, 2007. "The Age of Hiring and Deferred Compensation: Evidence from Australia," The Economic Record, The Economic Society of Australia, vol. 83(261), pages 174-190, 06.
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Cited by:
  1. Ilmakunnas, Pekka & Ilmakunnas, Seija, 2012. "Age segregation and hiring of older employees: low mobility revisited," MPRA Paper 37655, University Library of Munich, Germany.

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