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Fostering job search among older workers: the case for pension reform

Author

Listed:
  • J. Ignacio García Pérez

    (Department of Economics, Universidad Pablo de Olavide)

  • Alfonso R. Sánchez Mártin

    (Department of Economics, Universidad Pablo de Olavide)

Abstract

The job search demands made upon older unemployed workers in developed economies have traditionally been very relaxed. This has recently changed in some European countries (eg, Germany and Finland), as part of an effort to increase the labor force participation of older workers. Is this new approach appropriate? There is some disagreement among academics about the optimality of this new policy stance. We contribute to this debate by exploring the consequences of institutional reform in Spain, a country with a high rate of unemployment and a tolerant attitude toward the use of unemployment benefits as early retirement income. We develop an applied model of job-search and retirement behavior; calibrate it to the specificities of the Spanish case and successfully verify its empirical validity. We use the model to explore the effects of a change in the pension rules to link early retirement penalties to the age when an individual stops paying contributions. This reform removes the incentives to remain unemployed without searching, encouraging individuals to either retire or actively engage in job seeking. It results in welfare losses, especially for those workers that respond by changing behavior; yet the reform also raises enough extra resources whereby the public authorities may more than compensate all the affected workers.

Suggested Citation

  • J. Ignacio García Pérez & Alfonso R. Sánchez Mártin, 2012. "Fostering job search among older workers: the case for pension reform," Working Papers 12.09, Universidad Pablo de Olavide, Department of Economics.
  • Handle: RePEc:pab:wpaper:12.09
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    References listed on IDEAS

    as
    1. García-Pérez, J. Ignacio & Jiménez-Martín, Sergi & Sánchez-Martín, Alfonso R., 2013. "Retirement incentives, individual heterogeneity and labor transitions of employed and unemployed workers," Labour Economics, Elsevier, vol. 20(C), pages 106-120.
    2. 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.
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    6. Jean-Olivier Hairault & François Langot & Thepthida Sopraseuth, 2010. "Distance to Retirement and The Job Search of Older Workers: The Case For Delaying Retirement Age," Post-Print hal-00517107, HAL.
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    1. Regreso al futuro: ¿jubilación anticipada voluntaria a los 60?
      by Sergi Jiménez in Nada Es Gratis on 2014-07-18 11:00:33

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    Cited by:

    1. Sarah Le Duigou & Pierre-Jean Messe, 2017. "Pension reforms, older workers' employment and the role of job separation and finding rates in France," TEPP Working Paper 2017-10, TEPP.

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    More about this item

    Keywords

    unemployment; retirement; pension reform; search models.;
    All these keywords.

    JEL classification:

    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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