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The Pre-Retirement Job Search: A Basic Explanation of the Older Worker Employment

  • Jean-Olivier Hairault


    (Paris School of Economics (PSE), University of Paris I Panthéon-Sorbonne and IZA (Bonn))

  • François Langot


    (PSE - jourdan, CEPREMAP and GAINS University of Maine)

  • Thepthida Sopraseuth


    (PSE - jourdan, CEPREMAP and EPEE University of Evry)

This paper presents a theoretical foundation and empirical evidence in favor of the view that the retirement age decision impacts on the search intensity of older workers before this age. Countries with a retirement age at 60 are indeed characterized by lower employment rates for workers aged 55-59. Based on the French Labor Force Survey, we show that the likelihood of employment is significantly affected by the distance from retirement, in addition to age and other relevant variables. We then extend McCall’s (1970) job search model by explicitly integrating life-cycle features and the retirement decision. Using simulations. we show that the distance effect in conjunction with the generosity of unemployment benefits for older workers explains the low rate of employment just before the eligibility retirement age. Finally, we show that implementing actuarially-fair schemes, not only extends the retirement age, but also encourages a more intensive job-search by older unemployed workers.

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Paper provided by Centre d'Études des Politiques Économiques (EPEE), Université d'Evry Val d'Essonne in its series Documents de recherche with number 07-01.

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Length: 42 pages
Date of creation: 2007
Date of revision:
Handle: RePEc:eve:wpaper:07-01
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