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Distance to Retirement and The Job Search of Older Workers: The Case For Delaying Retirement Age

Author

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  • Jean-Olivier Hairault

    (PSE - Paris School of Economics, CES - Centre d'économie de la Sorbonne - CNRS - Centre National de la Recherche Scientifique - UP1 - Université Panthéon-Sorbonne, IZA - Institute for the Study of Labor)

  • François Langot

    (IZA - Institute for the Study of Labor, GAINS-TEPP - UM - Le Mans Université, CEPREMAP - Centre pour la recherche économique et ses applications)

  • Thepthida Sopraseuth

    (GAINS-TEPP - UM - Le Mans Université)

Abstract

This paper presents a theoretical foundation and empirical evidence in favor of the view that the retirement age decision impacts on the employment 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.

Suggested Citation

  • Jean-Olivier Hairault & François Langot & Thepthida Sopraseuth, 2010. "Distance to Retirement and The Job Search of Older Workers: The Case For Delaying Retirement Age," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00517107, HAL.
  • Handle: RePEc:hal:cesptp:hal-00517107
    DOI: 10.1162/jeea_a_00014
    Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-00517107
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    References listed on IDEAS

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    1. Fabien Postel-Vinay & Jean-Marc Robin, 2004. "To Match or Not to Match? Optimal Wage Policy With Endogenous Worker Search Intensity," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 7(2), pages 297-330, April.
    2. Ana Castaneda & Javier Diaz-Gimenez & Jose-Victor Rios-Rull, 2003. "Accounting for the U.S. Earnings and Wealth Inequality," Journal of Political Economy, University of Chicago Press, vol. 111(4), pages 818-857, August.
    3. Seater, John J., 1977. "A unified model of consumption, labor supply, and job search," Journal of Economic Theory, Elsevier, vol. 14(2), pages 349-372, April.
    Full references (including those not matched with items on IDEAS)

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    Keywords

    Job Search; Older Workers; Retirement;

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