IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Age-Specific Employment Policies

  • Bhattacharya, Joydeep
  • Reed, Robert

Many countries around the world are experiencing a significant shift in demographic patterns towards an older population. The age composition of the labor force has also changed dramatically, often accompanied by sharp reductions in the labor force participation rates of older workers. These phenomena in concert pose numerous challenges for the design of public pension programs and labor market policies in general. While governments have traditionally encouraged early retirement by the elderly to free up jobs for the young, such policies now impose an unprecedented tax burden on the current younger generations of working individuals. This has prompted many governments to instead adopt policies that promote old-age labor force participation. The primary goal of this paper is to draw some qualititative insights about these different policy responses within the context of a dynamic general equilibrium model. In order to address the role of the lifecycle for the allocation of workers to jobs, we develop a model of the labor market characterized by search and matching frictions and embed it into an overlapping-generations framework. We explicitly introduce age-targeted labor market policies and endogenize labor force participation across all age groups. Our analysis reveals that the age composition of the labor force may cause an inefficient allocation of workers to jobs in the labor market thereby creating an efficiency-enhancing role for publicly-induced retirement. Interestingly, we also find that public pension programs may improve labor market welfare by "redistributing bargaining power" over the lifecycle. Our work suggests that recent policy initiatives aimed at reducing the work disincentives currently embedded in many public pension programs may further the income redistribution motive of social security, encourage labor market participation among the elderly, and increase total employment. In this vein, we find that complete elimination of the earnings test may

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.econ.iastate.edu/sites/default/files/publications/papers/p1814-2003-03-27.pdf
Download Restriction: no

Paper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 10256.

as
in new window

Length:
Date of creation: 27 Mar 2003
Date of revision:
Handle: RePEc:isu:genres:10256
Contact details of provider: Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
Phone: +1 515.294.6741
Fax: +1 515.294.0221
Web page: http://www.econ.iastate.edu
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Laurence J. Kotlikoff & Kent A. Smetters & Jan Walliser, 1998. "Social Security: Privatization and Progressivity," NBER Working Papers 6428, National Bureau of Economic Research, Inc.
  2. Gottschalk, Peter & Moffitt, Robert, 1999. "Changes in Job Instability and Insecurity Using Monthly Survey Data," Journal of Labor Economics, University of Chicago Press, vol. 17(4), pages S91-126, October.
  3. Jonathan Gruber, 2000. "Disability Insurance Benefits and Labor Supply," Journal of Political Economy, University of Chicago Press, vol. 108(6), pages 1162-1183, December.
  4. Didier Blanchet & Louis-Paul Pele, 1999. "Social Security and Retirement in France," NBER Chapters, in: Social Security and Retirement around the World, pages 101-133 National Bureau of Economic Research, Inc.
  5. Bound, John, 1989. "The Health and Earnings of Rejected Disability Insurance Applicants," American Economic Review, American Economic Association, vol. 79(3), pages 482-503, June.
  6. Gruber, J. & Madrian, B.C., 1994. "Health Insurance Availability and the Retirement Decision," Working papers 94-04, Massachusetts Institute of Technology (MIT), Department of Economics.
  7. Christopher J. O'Leary & Stephen A. Wandner, 2000. "Unemployment Compensation and Older Workers," Upjohn Working Papers and Journal Articles 00-61, W.E. Upjohn Institute for Employment Research.
  8. Sala-i-Martin, Xavier X, 1996. " A Positive Theory of Social Security," Journal of Economic Growth, Springer, vol. 1(2), pages 2a77-304, June.
  9. Leora Friedberg, 1999. "The Labor Supply Effects of the Social Security Earnings Test," NBER Working Papers 7200, National Bureau of Economic Research, Inc.
  10. Andrew B. Abel, 2002. "The Effects of a Baby Boom on Stock Prices and Capital Accumulation in the Presence of Social Security," NBER Working Papers 9210, National Bureau of Economic Research, Inc.
  11. Jonathan Gruber & Peter Orszag, 2000. "Does the Social Security Earnings Test Affect Labor Supply and Benefits Receipt?," NBER Working Papers 7923, National Bureau of Economic Research, Inc.
  12. Peter Diamond & Jonathan Gruber, 1997. "Social Security and Retirement in the U.S," NBER Working Papers 6097, National Bureau of Economic Research, Inc.
  13. Courtney Coile & Jonathan Gruber, 2001. "Social Security Incentives for Retirement," NBER Chapters, in: Themes in the Economics of Aging, pages 311-354 National Bureau of Economic Research, Inc.
  14. Michael D. Hurd, 1993. "The Effect of Labor Market Rigidities on the Labor Force Behavior of Older Workers," NBER Working Papers 4462, National Bureau of Economic Research, Inc.
  15. Richard Disney & Sarah Tanner, 2000. "The abolition of the earnings rule for UK pensioners," IFS Working Papers W00/13, Institute for Fiscal Studies.
  16. Joydeep Bhattacharya & Casey B. Mulligan & Robert R. Reed, 2004. "Labor Market Search and Optimal Retirement Policy," Economic Inquiry, Western Economic Association International, vol. 42(4), pages 560-571, October.
  17. Sewin Chan & Ann Huff Stevens, 2002. "How Does Job Loss Affect the Timing of Retirement?," NBER Working Papers 8780, National Bureau of Economic Research, Inc.
  18. Baker, Michael & Benjamin, Dwayne, 1999. "How do retirement tests affect the labour supply of older men?," Journal of Public Economics, Elsevier, vol. 71(1), pages 27-51, January.
  19. Robert H. Topel, 1990. "Specific Capital, Mobility, and Wages: Wages Rise with Job Seniority," NBER Working Papers 3294, National Bureau of Economic Research, Inc.
  20. Casey B. Mulligan & Xavier Sala-i-Martin, 1999. "Social security in theory and practice (I): Facts and political theories," Economics Working Papers 384, Department of Economics and Business, Universitat Pompeu Fabra.
  21. Christopher J. Ruhm, 1995. "Secular Changes in the Work and Retirement Patterns of Older Men," Journal of Human Resources, University of Wisconsin Press, vol. 30(2), pages 362-385.
  22. Casey B. Mulligan & Xavier Sala-i-Martin, 1999. "Social security in theory and practice (II): Efficiency theories, narrative theories and implications for reform," Economics Working Papers 385, Department of Economics and Business, Universitat Pompeu Fabra.
  23. Bound, John, 1991. "The Health and Earnings of Rejected Disability Insurance Applicants: Reply," American Economic Review, American Economic Association, vol. 81(5), pages 1427-34, December.
  24. Pissarides, Christopher A, 1992. "Loss of Skill during Unemployment and the Persistence of Employment Shocks," The Quarterly Journal of Economics, MIT Press, vol. 107(4), pages 1371-91, November.
  25. Courtney Coile & Jonathan Gruber, 2000. "Social Security and Retirement," NBER Working Papers 7830, National Bureau of Economic Research, Inc.
  26. Michele Boldrin & Sergi Jimenez-Martni & Franco Peracchi, 1997. "Social Security and Retirement in Spain," NBER Working Papers 6136, National Bureau of Economic Research, Inc.
  27. Thomas F. Cooley & Jorge Soares, 1999. "A Positive Theory of Social Security Based on Reputation," Journal of Political Economy, University of Chicago Press, vol. 107(1), pages 135-160, February.
  28. Alan J. Auerbach & Laurence J. Kotlikoff, 1984. "Simulating Alternative Social Security Responses to the Demographic Transition," NBER Working Papers 1308, National Bureau of Economic Research, Inc.
  29. Robert Shimer, 1999. "The Impact of Young Workers on the Aggregate Labor Market," NBER Working Papers 7306, National Bureau of Economic Research, Inc.
  30. Peter Diamond, 2004. "Social Security," American Economic Review, American Economic Association, vol. 94(1), pages 1-24, March.
  31. Davidson, Carl & Martin, Lawrence & Matusz, Steven, 1994. "Jobs and Chocolate: Samuelsonian Surpluses in Dynamic Models of Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 61(1), pages 173-92, January.
  32. Ruhm, Christopher J, 1990. "Bridge Jobs and Partial Retirement," Journal of Labor Economics, University of Chicago Press, vol. 8(4), pages 482-501, October.
  33. Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780199279173.
  34. Casey B. Mulligan, 2000. "Induced Retirement, Social Security, and the Pyramid Mirage," NBER Working Papers 7679, National Bureau of Economic Research, Inc.
  35. Gruber, Jonathan & Kubik, Jeffrey D., 1997. "Disability insurance rejection rates and the labor supply of older workers," Journal of Public Economics, Elsevier, vol. 64(1), pages 1-23, April.
  36. Fretwell, David H. & Benus, Jacob & O'Leary, Christopher J., 1999. "Evaluating the impact of active labor programs : results of cross country studies in Europe and Central Asia," Social Protection Discussion Papers 20131, The World Bank.
  37. Jacobson, Louis S & LaLonde, Robert J & Sullivan, Daniel G, 1993. "Earnings Losses of Displaced Workers," American Economic Review, American Economic Association, vol. 83(4), pages 685-709, September.
  38. Hutchens, Robert, 1986. "Delayed Payment Contracts and a Firm's Propensity to Hire Older Workers," Journal of Labor Economics, University of Chicago Press, vol. 4(4), pages 439-57, October.
  39. Jonathan Gruber & David Wise, 2001. "An International Perspective on Policies for an Aging Society," NBER Working Papers 8103, National Bureau of Economic Research, Inc.
  40. Black, Dan A, 1987. "The Social Security System, the Provision of Human Capital, and the Structure of Compensation," Journal of Labor Economics, University of Chicago Press, vol. 5(2), pages 242-54, April.
  41. Chan, Sewin & Stevens, Ann Huff, 2001. "Job Loss and Employment Patterns of Older Workers," Journal of Labor Economics, University of Chicago Press, vol. 19(2), pages 484-521, April.
  42. Bhattacharya, Joydeep & Reed, Robert, 2003. "Aging, Unemployment, and Welfare in a Life-Cycle Model with Costly Labor Market Search," Staff General Research Papers 10255, Iowa State University, Department of Economics.
  43. Pissarides, Christopher A, 1976. "Job Search and Participation," Economica, London School of Economics and Political Science, vol. 43(169), pages 33-49, February.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:isu:genres:10256. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Stephanie Bridges)

The email address of this maintainer does not seem to be valid anymore. Please ask Stephanie Bridges to update the entry or send us the correct address

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.