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Does the dismantlement of early retirement schemes increase unemployment in Belgium ?

  • Marjan, MAES

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Department of Economics)

Early retirement is often explained as resulting from a voluntary labour supply choice of a utility maximizing individual. nonetheless, a lof of individuals perceive retirement as a forced instead as a voluntary decision. This paper tries to accomodate voluntary and unvoluntary labour supply decisions within one model. On the basis of a large administrative dataset merged with Census data, we estimate a discrete-time competing risk model of transitions from Belgian private-sector employees into unemployment, early and old-age retirement while accounting for forward-looking retirement incentives. The estimated coefficients are used to simulate a cut in early retirement benefits. Although this could enhance the financial sustainability of the social security system for elderly, one might expect that this may ofrce people to retire involuntarily through elderly unemployment where they end up with a lower living standard or even in poverty. Alternatively, it could stimulate employees to work longer until they qualify for old-age pension benefits. The model predicts a strong increase of the exit rates towards unemployment between age 52 and 57 while exit towards the old-age pension system marginally increases until age 63. In particular, blue-collars with physically demanding jobs in traditional industries have a higher risk to become unemployed while white-collar workers, members of voluntary saving plans or occupational pension schemes and highly educated workers are predicted to move in the old-age pension system.

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Paper provided by Université catholique de Louvain, Département des Sciences Economiques in its series Discussion Papers (ECON - Département des Sciences Economiques) with number 2008041.

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Length: 46
Date of creation: 01 Dec 2008
Date of revision:
Handle: RePEc:ctl:louvec:2008041
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  1. Eklöf, Matias & Hallberg, Daniel, 2006. "Estimating retirement behavior with special early retirement offers," Working Paper Series 2006:13, Uppsala University, Department of Economics.
  2. Luca Spataro, 2002. "New Tools in Micromodeling Retirement Decisions: Overview and Applications to the Italian Case," CeRP Working Papers 28, Center for Research on Pensions and Welfare Policies, Turin (Italy).
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  5. Parsons, Donald O, 1982. "The Male Labour Force Participation Decision: Health, Reported Health, and Economic Incentives," Economica, London School of Economics and Political Science, vol. 49(193), pages 81-91, February.
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  8. Dahl, Svenn-Åge & Nilsen, Øivind Anti & Vaage, Kjell, 2002. "Gender Differences in Early Retirement Behaviour," Working Papers in Economics 02/02, University of Bergen, Department of Economics.
  9. Dimitri Paolini, 2002. "Demande de travail et âge de la retraite," CREPP Working Papers 0213, Centre de Recherche en Economie Publique et de la Population (CREPP) (Research Center on Public and Population Economics) HEC-Management School, University of Liège.
  10. Coile, Courtney & Diamond, Peter & Gruber, Jonathan & Jousten, Alain, 2002. "Delays in claiming social security benefits," Journal of Public Economics, Elsevier, vol. 84(3), pages 357-385, June.
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  12. Desmet, Raphaël & Jousten, Alain & Perelman, Sergio, 2005. "The Benefits of Separating Early Retirees from the Unemployed: Simulation Results for Belgian Wage Earners," IZA Discussion Papers 1571, Institute for the Study of Labor (IZA).
  13. Olivia S. Mitchell & John W. R. Phillips, 2000. "Retirement Responses to Early Social Security Benefit Reductions," Working Papers wp006, University of Michigan, Michigan Retirement Research Center.
  14. Diamond, P. A. & Hausman, J. A., 1984. "Individual retirement and savings behavior," Journal of Public Economics, Elsevier, vol. 23(1-2), pages 81-114.
  15. Meghir, Costas & Whitehouse, Edward, 1997. "Labour market transitions and retirement of men in the UK," Journal of Econometrics, Elsevier, vol. 79(2), pages 327-354, August.
  16. Ranzani, Marco, 2006. "Social Security and Labour Supply: the Italian 1992 Reform as a Natural Experiment," MPRA Paper 16569, University Library of Munich, Germany, revised Dec 2008.
  17. Joseph Quinn & Richard Burkhauser & Kevin Cahill & Robert Weathers, 1998. "Microeconometric Analysis of the Retirement Decision: United States," OECD Economics Department Working Papers 203, OECD Publishing.
  18. David Dorn & Alfonso Sousa-Poza, 2005. "Early Retirement: Free Choice or Forced Decision," CESifo Working Paper Series 1542, CESifo Group Munich.
  19. Raffaele Miniaci & Elena Stancanelli, 1998. "Microeconometric Analysis of the Retirement Decision: United Kingdom," OECD Economics Department Working Papers 206, OECD Publishing.
  20. Courtney Coile & Jonathan Gruber, 2000. "Social Security and Retirement," NBER Working Papers 7830, National Bureau of Economic Research, Inc.
  21. Eric Bonsang & Bernard Delhausse & Sergio Perelman, 2002. "Les conditions de vie des prépensionnés," CREPP Working Papers 0211, Centre de Recherche en Economie Publique et de la Population (CREPP) (Research Center on Public and Population Economics) HEC-Management School, University of Liège.
  22. Bruno Crépon & Nicolas Deniau & Sébastien Pérez-Duarte, 2003. "Wages, Productivity and Worker Characteristics : A French Perspective," Working Papers 2003-04, Centre de Recherche en Economie et Statistique.
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