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Technical Progress and Early Retirement

  • Avner Ahituv
  • Joeph Zeira

    ()

    (The Hebrew University of Jerusalem and CEPR)

This paper claims that technical progress induces early retirement of older workers. Technical progress erodes technology specific human capital. Since older workers have shorter career horizons, there is less incentive for them or for their employers to invest in learning how to use the new technologies. Consequently, they are more likely to stop working. We call this effect the erosion effect. Since technical progress also raises wages in the economy as a whole and since technical progress is positively correlated across sectors, this presents an opposite effect of technical progress, which we call the wage effect. Using individual and sector data, we separate the two effects and find support for our theory. JEL Specification: J24, J26, O15, O33

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Paper provided by University of Crete, Department of Economics in its series Working Papers with number 0801.

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Length: 43 pages
Date of creation:
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Handle: RePEc:crt:wpaper:0801
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  1. Aghion, Philippe & Howitt, Peter, 1991. "Growth and Unemployment," CEPR Discussion Papers 577, C.E.P.R. Discussion Papers.
  2. Jordi Gali, 1999. "Technology, Employment, and the Business Cycle: Do Technology Shocks Explain Aggregate Fluctuations?," American Economic Review, American Economic Association, vol. 89(1), pages 249-271, March.
  3. Stock, James H & Wise, David A, 1990. "Pensions, the Option Value of Work, and Retirement," Econometrica, Econometric Society, vol. 58(5), pages 1151-80, September.
  4. Oded Galor & Omer Moav, 1998. "Ability Biased Technological Transition, Wage Inequality, and Economic Growth," Working Papers 98-14, Brown University, Department of Economics.
  5. Helpman, Elhanan & Trajtenberg, Manuel, 1994. "A Time to Sow and a Time to Reap: Growth Based on General Purpose Technologies," CEPR Discussion Papers 1080, C.E.P.R. Discussion Papers.
  6. Dale W. Jorgenson & Kevin J. Stiroh, 2000. "Raising the Speed Limit: US Economic Growth in the Information Age," OECD Economics Department Working Papers 261, OECD Publishing.
  7. Courtney Coile & Jonathan Gruber, 2000. "Social Security and Retirement," NBER Working Papers 7830, National Bureau of Economic Research, Inc.
  8. Leora Friedberg, 2003. "The impact of technological change on older workers: Evidence from data on computer use," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 56(3), pages 511-529, April.
  9. 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.
  10. Olivier Jean Blanchard & Danny Quah, 1988. "The Dynamic Effects of Aggregate Demand and Supply Disturbance," Working papers 497, Massachusetts Institute of Technology (MIT), Department of Economics.
  11. Ashenfelter, Orley & Card, David, 2001. "Did the Elimination of Mandatory Retirement Affect Faculty Retirement Flows?," IZA Discussion Papers 402, Institute for the Study of Labor (IZA).
  12. Ann P. Bartel & Nachum Sicherman, 1997. "Technological Change and Wages: An Inter-Industry Analysis," NBER Working Papers 5941, National Bureau of Economic Research, Inc.
  13. Cooley, Thomas F. & Dwyer, Mark, 1998. "Business cycle analysis without much theory A look at structural VARs," Journal of Econometrics, Elsevier, vol. 83(1-2), pages 57-88.
  14. Feldstein, Martin S, 1974. "Social Security, Induced Retirement, and Aggregate Capital Accumulation," Journal of Political Economy, University of Chicago Press, vol. 82(5), pages 905-26, Sept./Oct.
  15. Leora Friedberg, 2003. "The Impact of Technological Change on Older Workers: Evidence from Data on Computer Use," ILR Review, Cornell University, ILR School, vol. 56(3), pages 511-529, April.
  16. Boucekkine, Raouf & de la Croix, David & Licandro, Omar, 2002. "Vintage Human Capital, Demographic Trends, and Endogenous Growth," Journal of Economic Theory, Elsevier, vol. 104(2), pages 340-375, June.
  17. repec:fth:harver:1487 is not listed on IDEAS
  18. Kevin J. Stiroh & Dale W. Jorgenson, 1999. "Information Technology and Growth," American Economic Review, American Economic Association, vol. 89(2), pages 109-115, May.
  19. Chari, V V & Hopenhayn, Hugo, 1991. "Vintage Human Capital, Growth, and the Diffusion of New Technology," Journal of Political Economy, University of Chicago Press, vol. 99(6), pages 1142-65, December.
  20. Alan L. Gustman & Thomas L. Steinmeier, 2000. "Retirement Outcomes in the Health and Retirement Study," NBER Working Papers 7588, National Bureau of Economic Research, Inc.
  21. Jonathan Gruber & David Wise, 1997. "Social Security Programs and Retirement Around the World: Introduction and Summary of Papers by..," NBER Working Papers 6134, National Bureau of Economic Research, Inc.
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