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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. Geoffrey H. Kingston, 2001. "Online Appendix to Efficient Timing of Retirement," Technical Appendices kingston00, Review of Economic Dynamics.
  2. 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, vol. 28(4), pages 575-595, October.
  3. 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, The International Association for the Study of Insurance Economics, vol. 28(4), pages 652-672, October.
  4. Stern, Steven, 1987. "Promotion and Optimal Retirement," Journal of Labor Economics, University of Chicago Press, vol. 5(4), pages S107-23, October.
  5. Gustman, Alan L & Steinmeier, Thomas L, 1986. "A Structural Retirement Model," Econometrica, Econometric Society, vol. 54(3), pages 555-84, May.
  6. 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.
  7. Moulton, Brent R, 1990. "An Illustration of a Pitfall in Estimating the Effects of Aggregate Variables on Micro Unit," The Review of Economics and Statistics, MIT Press, vol. 72(2), pages 334-38, May.
  8. 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.
  9. Sveinbjörn Blöndal & Stefano Scarpetta, 1999. "The Retirement Decision in OECD Countries," OECD Economics Department Working Papers 202, OECD Publishing.
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  11. 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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  13. Silvana Pozzebon & Olivia S. Mitchell, 1986. "Married Women's Retirement Behavior," NBER Working Papers 2104, National Bureau of Economic Research, Inc.
  14. Romain Duval, 2003. "The Retirement Effects of Old-Age Pension and Early Retirement Schemes in OECD Countries," OECD Economics Department Working Papers 370, OECD Publishing.
  15. 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.
  16. repec:wop:syecwp:9903 is not listed on IDEAS
  17. 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.
  18. Richard V. Burkhauser, 1979. "The Pension Acceptance Decision of Older Workers," Journal of Human Resources, University of Wisconsin Press, vol. 14(1), pages 63-75.
  19. Froot, Kenneth A., 1989. "Consistent Covariance Matrix Estimation with Cross-Sectional Dependence and Heteroskedasticity in Financial Data," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 24(03), pages 333-355, September.
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  21. Gary Burtless & Joseph F. Quinn, 2000. "Retirement Trends and Policies to Encourage Work Among Older Americans," Boston College Working Papers in Economics 436, Boston College Department of Economics.
  22. 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.
  23. Gustman, Alan L & Steinmeier, Thomas L, 2000. "Retirement in Dual-Career Families: A Structural Model," Journal of Labor Economics, University of Chicago Press, vol. 18(3), pages 503-45, July.
  24. Burtless, Gary, 1986. "Social Security, Unanticipated Benefit Increases, and the Timing of Retirement," Review of Economic Studies, Wiley Blackwell, vol. 53(5), pages 781-805, October.
  25. Lazear, Edward P, 1979. "Why Is There Mandatory Retirement?," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1261-84, December.
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