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Early Retirement: Free Choice or Forced Decision

Author

Listed:
  • David Dorn
  • Alfonso Sousa-Poza

Abstract

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.

Suggested Citation

  • David Dorn & Alfonso Sousa-Poza, 2005. "Early Retirement: Free Choice or Forced Decision," CESifo Working Paper Series 1542, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_1542
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    File URL: http://www.cesifo-group.de/DocDL/cesifo1_wp1542.pdf
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    References listed on IDEAS

    as
    1. 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;The Geneva Association, vol. 28(4), pages 652-672, October.
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    6. 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.
    7. Winfried Schm&aauml;hl, 2003. "Ageing Workforce: Firm Strategies and Public Policy in Germany," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 28(4), pages 575-595, October.
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    More about this item

    Keywords

    early retirement; involuntary early retirement; social security; pensions;

    JEL classification:

    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • 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

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