The Effect of Early Retirement Incentives on the Training Participation of Older Workers

Human capital theory predicts that older workers are less likely to participate in on‐the‐job training than younger workers, due to lower net returns on such investments. Early retirement institutions are likely to affect these returns. Using the European Community Household Panel we show that older workers participate less in training, and that early retirement institutions do indeed matter. Generous early retirement schemes discourage older workers from taking part in training, whereas flexible early retirement schemes encourage this. Finally, the results suggest that in most European countries training can keep older workers longer in the labour market.