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Taxation of early retirement windows and delaying retirement: the French experience

  • Pierre-Jean Messe

    (LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - Université de Nantes : EA4272, GAINS - Groupe d'Analyse des Itinéraires et des Niveaux Salariaux - Université du Maine, TEPP - Travail, Emploi et Politiques Publiques - CNRS : FR3435 - Université Paris-Est Marne-la-Vallée (UPEMLV))

This paper investigates the e ect of the 2003 French pension reform on hiring, ring and employment rates among older workers. This reform increased the mandatory retirement age and simultaneously it set a tax levied on early retirement windows payed by rms to their older workers, to encourage them to leave their job early. We use a matching model with endogenous job destruction extended to account for a mandatory retirement age and we calibrate the model with data drawn from the French Labor Force Surveys for the years 2001 and 2002. We show that in the case of a high tax rate, delaying retirement raises job separation rates, which partially o sets its positive e ect on job nding rates. Consequently, the combination of an increase in the retirement age and a taxation on early retirement windows may have perverse e ects on the employment rate among older workers.

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Paper provided by HAL in its series Working Papers with number halshs-00809758.

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Date of creation: Feb 2010
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Handle: RePEc:hal:wpaper:halshs-00809758
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