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Does the dismantlement of early retirement schemes increase unemployment in Belgium?

  • Maes, Marjan

    ()

    (Hogeschool-Universiteit Brussel (HUB), Belgium
    Katholieke Universiteit Leuven, Belgium)

Early retirement is often explained as resulting from a voluntary labour supply choice of a utility maximizing individual. Nonetheless, a lot of individuals perceive retirement as a forced instead of a voluntary decision. This paper tries to accommodate voluntary and involuntary labour supply decisions within one model. On the basis of a large administrative dataset merged with Census data, we estimate a discrete-time competing risk model of transitions from Belgian private-sector employees into unemployment, early and old-age retirement while accounting for forward- looking retirement incentives. The estimated coefficients are used to simulate a cut in early retirement benefits. Although this could enhance the financial sustainability of the social security system for elderly, one might expect that this may force people to retire involuntarily through elderly unemployment where they end up with a lower living standard or even in poverty. Alternatively, it could stimulate employees to work longer until they qualify for old-age pension benefits. The model predicts a strong increase of the exit rates towards unemployment between age 52 and 57 while exit towards the old-age pension system marginally increases until age 63. In particular, blue-collars with physically demanding jobs in traditional industries have a higher risk to become unemployed while white- collar workers, members of voluntary saving plans or occupational pension schemes and highly educated workers are predicted to move in the old-age pension system.

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File URL: http://lirias.hubrussel.be/handle/123456789/2276
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Paper provided by Hogeschool-Universiteit Brussel, Faculteit Economie en Management in its series Working Papers with number 2008/57.

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Length: 46 pages
Date of creation: Dec 2008
Date of revision:
Handle: RePEc:hub:wpecon:200857
Contact details of provider: Web page: http://research.hubrussel.be

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