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Too Old to Work, Too Young to Retire? Revised Version of Working Paper 220, Economics Series, October 2007

Author

Listed:
  • Ichino, Andrea

    (University Bologna)

  • Schwerdt, Guido

    (Ifo Institute for Economic Research)

  • Winter-Ebmer, Rudolf

    (Department of Economics, University of Linz, and Institute for Advanced Studies, Vienna)

  • Zweimüller, Josef

    (Department of Economics, University of Zurich)

Abstract

We study whether employment prospects of old and young workers differ after a plant closure. Using Austrian administrative data, we show that old and young workers face similar displacement costs in terms of employment in the long-run, but old workers lose considerably more initially and gain later. We interpret these findings using a search model with retirement as an absorbing state, that we calibrate to match the observed patterns. Our finding is that the dynamics of relative employment losses of old versus young workers after a displacement are mainly explained by different opportunities of transition into retirement. In contrast, differences in layoff rates and job offer arrival rates cannot explain these patterns. Our results support the idea that retirement incentives, more than weak labor demand, are responsible for the low employment rates of older workers.

Suggested Citation

  • Ichino, Andrea & Schwerdt, Guido & Winter-Ebmer, Rudolf & Zweimüller, Josef, 2013. "Too Old to Work, Too Young to Retire? Revised Version of Working Paper 220, Economics Series, October 2007," Economics Series 302, Institute for Advanced Studies.
  • Handle: RePEc:ihs:ihsesp:302
    as

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    File URL: http://www.ihs.ac.at/publications/eco/es-302.pdf
    File Function: First version, 2013
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    References listed on IDEAS

    as
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      • Josef Zweimüller & Rudolf Winter-Ebmer & Rafael Lalive & Andreas Kuhn & Jean-Philippe Wuellrich & Oliver Ruf & Simon Büchi, 2009. "Austrian Social Security Database," NRN working papers 2009-03, The Austrian Center for Labor Economics and the Analysis of the Welfare State, Johannes Kepler University Linz, Austria.
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    More about this item

    Keywords

    Aging; employability; plant closures; matching;

    JEL classification:

    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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