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Equilibrium unemployment and retirement

Author

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  • Hairault, Jean-Olivier
  • Langot, François
  • Zylberberg, André

Abstract

We first propose some new empirical evidence on the fact that the labor market conditions matter for the retirement decision at the individual level: we investigate whether unemployed workers retire before employed workers, other things being equal. Our main objective in this paper is then to propose an equilibrium unemployment approach to retirement decisions that allows us to derive the positive and normative features of retirement decisions when search and matching frictions are considered. Two main conclusions emerge: the retirement decision of unemployed workers depends on the labor-market frictions whereas that of employed workers does not; the existence of search externalities makes the retirement age of unemployed workers intrinsically suboptimal. Considering Social Security policy issues, we show that the complete elimination of the implicit tax on continued activity is not necessarily welfare-optimizing in a second best world where the labor market equilibrium suffers from distortions.

Suggested Citation

  • Hairault, Jean-Olivier & Langot, François & Zylberberg, André, 2015. "Equilibrium unemployment and retirement," European Economic Review, Elsevier, vol. 79(C), pages 37-58.
  • Handle: RePEc:eee:eecrev:v:79:y:2015:i:c:p:37-58
    DOI: 10.1016/j.euroecorev.2015.07.002
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    References listed on IDEAS

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    1. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, March.
    2. Eric French, 2005. "The Effects of Health, Wealth, and Wages on Labour Supply and Retirement Behaviour," Review of Economic Studies, Oxford University Press, vol. 72(2), pages 395-427.
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    Cited by:

    1. Hairault, Jean-Olivier & Langot, François & Zylberberg, André, 2015. "Equilibrium unemployment and retirement," European Economic Review, Elsevier, vol. 79(C), pages 37-58.
    2. Bruno Decreuse & Guillaume Wilemme, 2019. "Age Discontinuity and Nonemployment Benefit Policy Evaluation through the Lens of Job Search Theory," Working Papers halshs-02072800, HAL.
    3. Kerndler, Martin, 2016. "Contracting frictions and inefficient layoffs of older workers," Annual Conference 2016 (Augsburg): Demographic Change 145711, Verein für Socialpolitik / German Economic Association.
    4. Bi, Sheng & Langot, François, 2014. "Search and Retirement under Asymmetric Information," IZA Discussion Papers 8288, Institute of Labor Economics (IZA).

    More about this item

    Keywords

    Search; Matching; Retirement; Social Security;

    JEL classification:

    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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