Permanent wage cost subsidies for older workers. An effective tool for employment retention and postponing early retirement?

Abstract

This paper examines the effects of a permanent wage cost subsidy in Belgium on employment retention, working time and hourly wage of older men. To estimate these effects we propose a semi-parametric weighted difference-in-differences estimator that accounts for endogenous stratification in the sampling from a population of men born between 1941 and 1950. We find small positive short-run impacts on working time and larger ones on the retention rate in employment, but only for employees at high risk of early retirement. The wage is not affected.