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

  • Jean-Olivier Hairault

    (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, IZA - Institute for the Study of Labor)

  • François Langot

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

  • Thepthida Sopraseuth

    (GAINS-TEPP - Université du Maine)

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.

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Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number hal-00517107.

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Date of creation: 01 Sep 2010
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Publication status: Published, Journal of the European Economic Association, 2010, 8, 5, 1034-1076
Handle: RePEc:hal:cesptp:hal-00517107
Note: View the original document on HAL open archive server: http://hal.archives-ouvertes.fr/hal-00517107
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  1. 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.
  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.
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