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Is Early Retirement Encouraged by the Employer?: Labor-Demend Effects of Age-Related Collective Fees

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Abstract

In Sweden, employers pay non-wage costs for their workforce in the form of legislated employment tax and collective fees. For parts of the workforce, the collective fees are progressive with respect to the employee’s age and wage. The objective of this paper is to examine how non-wage costs affect voluntary early retirement. To this end we use a large longitudinal employer–employee matched data set with administrative records of the private sector in Sweden. We exploit the variation in collective fee costs across companies to identify employer incentives to encourage early retirement. The results from the instrumental variable estimator suggest that a 1 percentage point increase in non-wage costs in relation to wage costs increases retirement by 6 percent. Further, given the wage sum and workforce structure, large firms spend more on non-wage compensation than small firms. The share of non-wage costs in relation to the wage sum is also positively linked to net employment growth.

Suggested Citation

  • Hallberg, Daniel, 2011. "Is Early Retirement Encouraged by the Employer?: Labor-Demend Effects of Age-Related Collective Fees," Arbetsrapport 2011:6, Institute for Futures Studies.
  • Handle: RePEc:hhs:ifswps:2011_006
    Note: ISSN: 1652-120X; ISBN: 978-91-85619-82-5
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    File URL: http://www.framtidsstudier.se/wp-content/uploads/2011/06/Arbetsrapport-2011-nr6.pdf
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    References listed on IDEAS

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    1. Daniel Hallberg & Matias Eklöf, 2010. "Do buy-outs of older workers matter?: Estimating retirement behavior with special early retirement offers," International Journal of Manpower, Emerald Group Publishing, vol. 31(3), pages 337-359, June.
    2. Cervini-Plá, María & Ramos, Xavier & Ignacio Silva, José, 2014. "Wage effects of non-wage labour costs," European Economic Review, Elsevier, vol. 72(C), pages 113-137.
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    More about this item

    Keywords

    Early retirement; Non-wage labor costs; Pensions; Labor demand; Collective fees;

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions

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