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Social Security Benefits and Employer Behavior: Evaluating Social Security Early Retirement Benefits as a Form of Unemployment Insurance


  • Hutchens, Robert


Employers often shed older workers by encouraging them to "take" early retirement. An implicit contract model suggests that this behavior will be influenced by the social security early retirement program. When demand is weak and layoffs are necessary, social security benefits can act like a form of unemployment insurance, effectively subsidizing workforce reductions by lowering the cost to the firm of shedding older workers. Since social security benefits are not subject to experience rating, the result is an inefficiently high level of early retirements. This paper concludes with a discussion of policies for restoring early retirements to efficient levels. Copyright 1999 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Suggested Citation

  • Hutchens, Robert, 1999. "Social Security Benefits and Employer Behavior: Evaluating Social Security Early Retirement Benefits as a Form of Unemployment Insurance," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(3), pages 659-678, August.
  • Handle: RePEc:ier:iecrev:v:40:y:1999:i:3:p:659-78

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    References listed on IDEAS

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    Cited by:

    1. Frimmel, Wolfgang & Horvath, Thomas & Schnalzenberger, Mario & Winter-Ebmer, Rudolf, 2015. "Seniority Wages and the Role of Firms in Retirement," Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 113163, Verein für Socialpolitik / German Economic Association.
    2. Daniel Hallberg, 2011. "Economic Fluctuations and Retirement of Older Employees," LABOUR, CEIS, vol. 25(3), pages 287-307, September.
    3. Alfonso Sánchez-Martin & J. García-Pérez & Sergi Jiménez-Martín, 2014. "Delaying the Normal and Early Retirement Ages in Spain: Behavioural and Welfare Consequences for Employed and Unemployed Workers," De Economist, Springer, vol. 162(4), pages 341-375, December.
    4. Courtney C. Coile & Phillip B. Levine, 2007. "Labor Market Shocks and Retirement: Do Government Programs Matter?," NBER Chapters,in: Public Policy and Retirement, Trans-Atlantic Public Economics Seminar (TAPES), pages 1902-1919 National Bureau of Economic Research, Inc.
    5. Tomi Kyyrä & Ralf A. Wilke, 2007. "Reduction in the Long-Term Unemployment of the Elderly: A Success Story from Finland," Journal of the European Economic Association, MIT Press, vol. 5(1), pages 154-182, March.
    6. David Neumark & Patrick Button, 2014. "Did Age Discrimination Protections Help Older Workers Weather the Great Recession?," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 33(3), pages 566-601, June.
    7. Giesecke, Matthias & Okoampah, Sarah, 2014. "Inequality of Opportunity in Retirement Age – The Role of Physical Job Demands," Ruhr Economic Papers 492, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    8. Darby, Julia & Melitz, Jacques, 2007. "Labour Market Adjustment, Social Spending and the Automatic Stabilizers in the OECD," CEPR Discussion Papers 6230, C.E.P.R. Discussion Papers.
    9. Messe, P.J., 2011. "Taxation of early retirement windows and delaying retirement: The French experience," Economic Modelling, Elsevier, vol. 28(5), pages 2319-2341, September.
    10. Hakola, Tuulia & Uusitalo, Roope, 2005. "Not so voluntary retirement decisions? Evidence from a pension reform," Journal of Public Economics, Elsevier, vol. 89(11-12), pages 2121-2136, December.
    11. Josef Zweimüller, 2018. "Unemployment insurance and the labor market," ECON - Working Papers 276, Department of Economics - University of Zurich.
    12. Даниелян, Владимир, 2016. "Детерминанты Пенсионного Возраста: Обзор Исследований
      [Determinants of Retirement Age: A Review of Research]
      ," MPRA Paper 73865, University Library of Munich, Germany.
    13. Owen Haaga & Richard W. Johnson, 2012. "Social Security Claiming: Trends and Business Cycle Effects," Discussion papers 12-01, Urban Institute, Program on Retirement Policy.
    14. Piera Bello & Vincenzo Galasso, 2015. "Old Before their Time: The Role of Employers in Retirement Decisions," CESifo Working Paper Series 5667, CESifo Group Munich.
    15. Hakola Tuulia, Uusitalo Roope, 2001. "Let's Make a Deal - the Impact of Social Security Provisions and Firm Liabilities on Early Retirement," Discussion Papers 260, VATT Institute for Economic Research.
    16. Julian Diaz Saavedra, 2014. "Early Retirement, Social Security, and Output Gap," ThE Papers 14/01, Department of Economic Theory and Economic History of the University of Granada..
    17. David Dorn & Alfonso Sousa-Poza, 2010. "'Voluntary' and 'involuntary' early retirement: an international analysis," Applied Economics, Taylor & Francis Journals, vol. 42(4), pages 427-438.
    18. David Dorn & Alfonso Sousa-Poza, 2005. "Early Retirement: Free Choice or Forced Decision," CESifo Working Paper Series 1542, CESifo Group Munich.
    19. Marczok, Yvonne Maria & Amann, Erwin, 2013. "Labor demand for senior employees in the context of early retirement," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79781, Verein für Socialpolitik / German Economic Association.
    20. H. Benitez-Silva & F. Heiland, 2008. "Early claiming of social security benefits and labour supply behaviour of older Americans," Applied Economics, Taylor & Francis Journals, vol. 40(23), pages 2969-2985.
    21. repec:sbe:breart:v:29:y:2009:i:2:a:3442 is not listed on IDEAS
    22. Eric Levin & Robert Wright, 2001. "Unemployment insurance, moral hazard, and economic growth," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 7(4), pages 373-384, November.
    23. repec:kap:iaecre:v:7:y:2001:i:4:p:373-384 is not listed on IDEAS

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