IDEAS home Printed from
   My bibliography  Save this paper

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.

Suggested Citation

  • Batyra, Anna & de la Croix, David & Pierrard, Olivier & Sneessens, Henri R., 2013. "Declining bargaining power of workers and the rise of early retirement in Europe," GIAM Working Papers 13-6, Galatasaray University Economic Research Center.
  • Handle: RePEc:ris:giamwp:2013_006

    Download full text from publisher

    File URL:
    File Function: Full text
    Download Restriction: no

    References listed on IDEAS

    1. David De La Croix & Géraldine Mahieu & Alexandra Rillaers, 2004. "How Should the Allocation of Resources Adjust to the Baby Bust?," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 6(4), pages 607-636, October.
    2. Eckstein, Zvi & van den Berg, Gerard J., 2007. "Empirical labor search: A survey," Journal of Econometrics, Elsevier, vol. 136(2), pages 531-564, February.
    3. Axel Börsch-Supan & Alexander Ludwig & Joachim Winter, 2006. "Ageing, Pension Reform and Capital Flows: A Multi-Country Simulation Model," Economica, London School of Economics and Political Science, vol. 73(292), pages 625-658, November.
    4. Philippe Michel & Pierre Pestieau, 2013. "Social Security And Early Retirement In An Overlapping-Generations Growth Model," Annals of Economics and Finance, Society for AEF, vol. 14(2), pages 723-737, November.
    5. Postel-Vinay, Fabien, 1998. "Transitional dynamics of the search model with endogenous growth," Journal of Economic Dynamics and Control, Elsevier, vol. 22(7), pages 1091-1115, May.
    6. Edward C. Prescott & Richard Rogerson & Johanna Wallenius, 2009. "Lifetime Aggregate Labor Supply with Endogenous Workweek Length," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 12(1), pages 23-36, January.
    7. J. J. McCall, 1970. "Economics of Information and Job Search," The Quarterly Journal of Economics, Oxford University Press, vol. 84(1), pages 113-126.
    8. Rogerson, Richard & Wallenius, Johanna, 2009. "Micro and macro elasticities in a life cycle model with taxes," Journal of Economic Theory, Elsevier, vol. 144(6), pages 2277-2292, November.
    9. Patrick Aubert & Bruno Crépon, 2003. "La productivité des salariés âgés : une tentative d'estimation," Économie et Statistique, Programme National Persée, vol. 368(1), pages 95-119.
    10. Hairault, Jean-Olivier & Langot, Francois, 2008. "Inequality and social security reforms," Journal of Economic Dynamics and Control, Elsevier, vol. 32(2), pages 386-410, February.
    11. Bean, Charles & Pissarides, Christopher, 1993. "Unemployment, consumption and growth," European Economic Review, Elsevier, vol. 37(4), pages 837-854, May.
    12. Julien Prat, 2007. "The Impact of Disembodied Technological Progress on Unemployment," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 10(1), pages 106-125, January.
    13. Heijdra, Ben J. & Romp, Ward E., 2009. "Retirement, pensions, and ageing," Journal of Public Economics, Elsevier, vol. 93(3-4), pages 586-604, April.
    14. Reinhard Hujer & Bernd Fitzenberger & Reinhold Schnabel & Thomas E. MaCurdy, 2001. "Testing for uniform wage trends in West-Germany: A cohort analysis using quantile regressions for censored data," Empirical Economics, Springer, vol. 26(1), pages 41-86.
    15. Romain Duval, 2003. "The Retirement Effects of Old-Age Pension and Early Retirement Schemes in OECD Countries," OECD Economics Department Working Papers 370, OECD Publishing.
    16. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, January.
    17. Morten O. Ravn, 2008. "The Consumption-Tightness Puzzle," NBER Chapters,in: NBER International Seminar on Macroeconomics 2006, pages 9-63 National Bureau of Economic Research, Inc.
    18. Chen, Been-Lon & Mo, Jie-Ping & Wang, Ping, 2002. "Market frictions, technology adoption and economic growth," Journal of Economic Dynamics and Control, Elsevier, vol. 26(11), pages 1927-1954, September.
    19. Emilie Daudey & Bruno Decreuse, 2006. "Higher education, employers' monopsony power and the labour share in OECD countries," Working Papers halshs-00409674, HAL.
    20. de la Croix,David & Michel,Philippe, 2002. "A Theory of Economic Growth," Cambridge Books, Cambridge University Press, number 9780521001151, March.
    21. Bhattacharya, Joydeep & Reed, Robert, 2003. "Aging, Unemployment, and Welfare in a Life-Cycle Model with Costly Labor Market Search," Staff General Research Papers Archive 10255, Iowa State University, Department of Economics.
    22. Moreno-Galbis, E., 2006. "Unemployment and endogenous growth with new technologies-skill complementarity," Economic Modelling, Elsevier, vol. 23(2), pages 364-386, March.
    23. Attanasio, Orazio & Kitao, Sagiri & Violante, Giovanni L., 2007. "Global demographic trends and social security reform," Journal of Monetary Economics, Elsevier, vol. 54(1), pages 144-198, January.
    24. repec:hal:journl:halshs-00270290 is not listed on IDEAS
    25. Leon J.H. Bettendorf & D. Peter Broer, 2003. "Lifetime Labor Supply in a Search Model of Unemployment," Tinbergen Institute Discussion Papers 03-032/2, Tinbergen Institute.
    26. Mortensen, Dale & Pissarides, Christopher, 2011. "Job Creation and Job Destruction in the Theory of Unemployment," Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 1, pages 1-19.
    27. Vegard Skirbekk, 2004. "Age and Individual Productivity: A Literature Survey," Vienna Yearbook of Population Research, Vienna Institute of Demography (VID) of the Austrian Academy of Sciences in Vienna, vol. 2(1), pages 133-154.
    28. Christopher J. Flinn & James J. Heckman, 1982. "Models for the Analysis of Labor Force Dynamics," NBER Working Papers 0857, National Bureau of Economic Research, Inc.
    29. Hairault, Jean-Olivier & Langot, François & Sopraseuth, Thepthida, 2006. "The Interaction between Retirement and Job Search: A Global Approach to Older Workers Employment," IZA Discussion Papers 1984, Institute for the Study of Labor (IZA).
    Full references (including those not matched with items on IDEAS)

    More about this item


    Overlapping Generations; Search Unemployment; Labor Force Participation; Ageing; Labor Market Policy and Institutions;

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ris:giamwp:2013_006. 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: (Renginar Senses Dayangac). General contact details of provider: .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.