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Early Retirement: Free Choice or Forced Decision

  • David Dorn
  • Alfonso Sousa-Poza

Early retirement is usually explained as a supply-side phenomenon. However, early retirement can also be a demand-side phenomenon arising from a firm's profit maximization behavior. This paper analyzes voluntary and involuntary early retirement based on international microdata covering 19 industrialized countries. The results indicate that generous early retirement provisions of the social security system do not only make voluntary early retirement more attractive for individuals, but also induce firms to encourage more employees to retire early. In particular, firms seem to use early retirement to reduce staff during economic recessions and as a means to circumvent employment protection legislation.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2005/wp-cesifo-2005-09/cesifo1_wp1542.pdf
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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1542.

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Date of creation: 2005
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Handle: RePEc:ces:ceswps:_1542
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  1. repec:wop:syecwp:9903 is not listed on IDEAS
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  15. David Dorn & Alfonso Sousa-Poza, 2003. "Why is the Employment Rate of Older Swiss so High? An Analysis of the Social Security System," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan, vol. 28(4), pages 652-672, October.
  16. Hurd, Michael D, 1990. "Research on the Elderly: Economic Status, Retirement, and Consumption and Saving," Journal of Economic Literature, American Economic Association, vol. 28(2), pages 565-637, June.
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  19. Peracchi, Franco & Welch, Finis, 1994. "Trends in Labor Force Transitions of Older Men and Women," Journal of Labor Economics, University of Chicago Press, vol. 12(2), pages 210-42, April.
  20. Winfried Schm”hl, 2003. "Ageing Workforce: Firm Strategies and Public Policy in Germany," The Geneva Papers on Risk and Insurance, The International Association for the Study of Insurance Economics, vol. 28(4), pages 575-595, October.
  21. David Dorn & Alfonso Sousa-Poza, 2005. "The Determinants of Early Retirement in Switzerland," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 141(II), pages 247-283, June.
  22. 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 659-78, August.
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  24. 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.
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