Abstract
Abstract In order to face the aging of their populations governments of developed countries reformed their retirement systems during the last two decades, by discouraging early retirement and increasing incentives to work for older workers. Senior participation rates to the labor force not only differ strikingly in level from one country to another, they also differ in their reaction to retirement incentives set by governments. This paper highlights how disutility to work can influence the effectiveness of such reforms. The authors build a highly stylized model according to which the reaction of senior activity rate to monetary incentives to work depends on the properties of the specific distribution of working conditions in the country. Second, taking the quality of labor relations as a proxy for working conditions, the authors show empirically that aggregate reactions to retirement incentives depend on the distribution of labor relations at country level. They use panel data for nineteen OECD countries from 1980 to 2004. They show that the elasticity of senior male labor force participation rate to retirement incentives is stronger in countries with better and more homogeneously distributed labor relations.
Highlights
Introduction and backroundMotivationThe issue of the eciency of economic reforms is a central one in public policy agenda
We show that trust to employers, approximated by labor relations, non-monetary rewards employees may get from their work and trust in others, foster the elasticity of senior male participation rate with respect to the implicit tax on continued work, which is the cost of staying at work compared with retiring
Senior individuals face a trade-o between work and retirement. This model shows how their choice depends on labor relations and how the distribution of working conditions alter the link between retirement incentives and labor force participation rate at the macroeconomic level
Summary
The issue of the eciency of economic reforms is a central one in public policy agenda. Most of the developed countries have been constantly adjusting pension systems during the last decades to reach these objectives This is why one of the main point of the Lisbon strategy to develop Europe was the fostering of senior employment in order to make Europe, by 2010, the most competitive and the most dynamic knowledge-based economy in the world. If we look at gure 2, when the Italian government strongly decreased the incentive to retirement in the second half of the 1990s, the senior employment rate continued its decreasing trend It is even more striking if we consider that this decrease in monetary incentive went alongside an increase of the standard retirement age from 60 in 1993 to 65 in 2002. We show that trust to employers, approximated by labor relations, non-monetary rewards employees may get from their work and trust in others, foster the elasticity of senior male participation rate with respect to the implicit tax on continued work, which is the cost of staying at work compared with retiring
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
