Generous early retirement provisions account for a large proportion of the drop in the labour force participation of elderly workers. The aim of this paper is to provide a political-economic explanation of the wide spread adoption of early retirement. We suggest that the political support for generous early retirement provisions relies on: (i) the existence of an initial, significant group of redundant elderly workers with incomplete working history, who are not entitled to an old age pension; and (ii) the policy persistence that this provision introduces by inducing low-ability workers to retire early. The majority which supports a social security system with early retirement in a bidimensional voting game is composed of elderly workers with incomplete working history and low-ability workers. A descriptive analysis of eleven OECD countries confirms the relevance of the initial group of redundant elderly workers. Early retirement provisions were adopted during the deindustrialization process, almost always, immediately after the first severe decrease in industrial employment.
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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number
2589.
J. Ignacio Conde-Ruiz & Vincenzo Galasso, 2003.
"Early Retirement,"
Review of Economic Dynamics,
Elsevier for the Society for Economic Dynamics, vol. 6(1), pages 12-36, January.
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Find related papers by JEL classification: D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Models of Political Processes: Rent-seeking, Elections, Legislatures, and Voting Behavior H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
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Hassler, John & Mora, Jose & Storesletten, Kjetil & Zilibotti, Fabrizio, 2002.
"The Survival of the Welfare State,"
Seminar Papers
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Other versions:
Stephen Coate & Stephen Morris, .
""Policy Persistence '',"
CARESS Working Papres
95-19, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences.
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CARESS Working Papres
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