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Declining bargaining power of workers and the rise of early retirement in Europe

  • Batyra, Anna

    ()

    (Galatasaray University Economic Research Center)

  • de la Croix, David
  • Pierrard, Olivier
  • Sneessens, Henri R.

We offer an alternative explanation for the decline in labor force participation of senior workers. Typically, tax and transfer explanations have been proposed. On the contrary, a model with imperfectly competitive labor market allows to consider as well the effects of a drop in bargaining power, which would not be possible in a purely neoclassical framework. We find that a decline in the bargaining power of workers, which has taken place in the last four decades, has largely contributed to the rise in inactivity in Europe. However, we need a combination of these two explanations, along with population aging and a fall in the matching efficiency, in order to correctly reproduce the joint evolutions of other labor market variables such as the employment and unemployment rates.

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Paper provided by Galatasaray University Economic Research Center in its series GIAM Working Papers with number 13-6.

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Length: 27 pages
Date of creation: 03 May 2013
Date of revision:
Handle: RePEc:ris:giamwp:2013_006
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