IDEAS home Printed from https://ideas.repec.org/a/eee/labeco/v90y2024ics0927537124000563.html
   My bibliography  Save this article

Early retirement incentives and transition into informality

Author

Listed:
  • Asik, Gunes A.

Abstract

This paper explores the impact of a super early retirement incentive that allowed men to retire as early as 44 years old in Turkey in 1992. Relying on a Fuzzy Regression Discontinuity Design, I find that taking up the incentives significantly reduced the labor force participation of middle-aged men in Turkey. Analysis by education categories suggests that the incentives had an impact on both the skilled and unskilled labor force. I find that the policy-induced take-up of pension benefit receipt significantly increased the probability of moving into informal employment contracts. Findings suggest that the probability of informal wage employment increased for low-skilled individuals while the probability of informal self-employment probability increased for high-skilled individuals. Among low-skilled workers, the incentives seem to have relaxed credit constraints.

Suggested Citation

  • Asik, Gunes A., 2024. "Early retirement incentives and transition into informality," Labour Economics, Elsevier, vol. 90(C).
    • Handle: RePEc:eee:labeco:v:90:y:2024:i:c:s0927537124000563
    DOI: 10.1016/j.labeco.2024.102561
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0927537124000563
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.labeco.2024.102561?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Rosenzweig, Mark R., 1988. "Labor markets in low-income countries," Handbook of Development Economics, in: Hollis Chenery & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 1, chapter 15, pages 713-762, Elsevier.
    2. Eric French, 2005. "The Effects of Health, Wealth, and Wages on Labour Supply and Retirement Behaviour," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 72(2), pages 395-427.
    3. Gong, Xiaodong & Van Soest, Arthur & Villagomez, Elizabeth, 2004. "Mobility in the Urban Labor Market: A Panel Data Analysis for Mexico," Economic Development and Cultural Change, University of Chicago Press, vol. 53(1), pages 1-36, October.
    4. Pradhan, Menno & van Soest, Arthur, 1995. "Formal and informal sector employment in urban areas of Bolivia," Labour Economics, Elsevier, vol. 2(3), pages 275-297, September.
    5. Alan I. Barreca & Jason M. Lindo & Glen R. Waddell, 2016. "Heaping-Induced Bias In Regression-Discontinuity Designs," Economic Inquiry, Western Economic Association International, vol. 54(1), pages 268-293, January.
    6. Aysit Tansel & Elif Oznur Acar, 2016. "The Formal/Informal Employment Earnings Gap: Evidence from Turkey," Research on Economic Inequality, in: Inequality after the 20th Century: Papers from the Sixth ECINEQ Meeting, volume 24, pages 121-154, Emerald Group Publishing Limited.
    7. Rafael La Porta & Andrei Shleifer, 2014. "Informality and Development," Journal of Economic Perspectives, American Economic Association, vol. 28(3), pages 109-126, Summer.
    8. Luc Behaghel & David M. Blau, 2012. "Framing Social Security Reform: Behavioral Responses to Changes in the Full Retirement Age," American Economic Journal: Economic Policy, American Economic Association, vol. 4(4), pages 41-67, November.
    9. David S. Lee & Thomas Lemieux, 2010. "Regression Discontinuity Designs in Economics," Journal of Economic Literature, American Economic Association, vol. 48(2), pages 281-355, June.
    10. Matias D. Cattaneo & Michael Jansson & Xinwei Ma, 2020. "Simple Local Polynomial Density Estimators," Journal of the American Statistical Association, Taylor & Francis Journals, vol. 115(531), pages 1449-1455, July.
    11. Alan I. Barreca & Melanie Guldi & Jason M. Lindo & Glen R. Waddell, 2011. "Saving Babies? Revisiting the effect of very low birth weight classification," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 126(4), pages 2117-2123.
    12. Keane, Michael & Moffitt, Robert, 1998. "A Structural Model of Multiple Welfare Program Participation and Labor Supply," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(3), pages 553-589, August.
    13. Richard Rogerson & Johanna Wallenius, 2013. "Nonconvexities, Retirement, and the Elasticity of Labor Supply," American Economic Review, American Economic Association, vol. 103(4), pages 1445-1462, June.
    14. Axel Börsch-Supan & Hendrik Jürges, 2012. "Disability, Pension Reform, and Early Retirement in Germany," NBER Chapters, in: Social Security Programs and Retirement around the World: Historical Trends in Mortality and Health, Employment, and Disability Insurance Participatio, pages 277-300, National Bureau of Economic Research, Inc.
    15. de Carvalho Filho, Irineu Evangelista, 2008. "Old-age benefits and retirement decisions of rural elderly in Brazil," Journal of Development Economics, Elsevier, vol. 86(1), pages 129-146, April.
    16. Christian Brinch & Erik Hernæs & Steinar Strøm, 2001. "Labour Supply Effects of an Early Retirement Programme," CESifo Working Paper Series 463, CESifo.
    17. Day Manoli & Andrea Weber, 2016. "Nonparametric Evidence on the Effects of Financial Incentives on Retirement Decisions," American Economic Journal: Economic Policy, American Economic Association, vol. 8(4), pages 160-182, November.
    18. Giesecke, Matthias & Jäger, Philipp, 2021. "Pension incentives and labor supply: Evidence from the introduction of universal old-age assistance in the UK," Journal of Public Economics, Elsevier, vol. 203(C).
    19. Börsch-Supan, Axel & Weiss, Matthias, 2016. "Productivity and age: Evidence from work teams at the assembly line," The Journal of the Economics of Ageing, Elsevier, vol. 7(C), pages 30-42.
    20. Meltem Dayioglu & Müşerref Küçükbayrak & Semih Tumen, 2022. "The impact of age-specific minimum wages on youth employment and education: a regression discontinuity analysis," International Journal of Manpower, Emerald Group Publishing Limited, vol. 43(6), pages 1352-1377, March.
    21. World Bank, 2009. "Female Labor Force Participation in Turkey : Trends, Determinants and Policy Framework," World Bank Publications - Reports 13249, The World Bank Group.
    22. Alexander M. Danzer, 2013. "Benefit Generosity and the Income Effect on Labour Supply: Quasi‐Experimental Evidence," Economic Journal, Royal Economic Society, vol. 123, pages 1059-1084, September.
    23. Hanel, Barbara & Riphahn, Regina T., 2012. "The timing of retirement — New evidence from Swiss female workers," Labour Economics, Elsevier, vol. 19(5), pages 718-728.
    24. Jonathan Gruber & David A. Wise, 2004. "Social Security Programs and Retirement around the World: Micro-Estimation," NBER Books, National Bureau of Economic Research, Inc, number grub04-1, February.
    25. Stiglitz, Joseph E, 1976. "The Efficiency Wage Hypothesis, Surplus Labour, and the Distribution of Income in L.D.C.s," Oxford Economic Papers, Oxford University Press, vol. 28(2), pages 185-207, July.
    26. Aguila, Emma, 2014. "Male labor force participation and social security in Mexico," Journal of Pension Economics and Finance, Cambridge University Press, vol. 13(2), pages 145-171, April.
    27. Kadir Atalay & Garry F. Barrett, 2015. "The Impact of Age Pension Eligibility Age on Retirement and Program Dependence: Evidence from an Australian Experiment," The Review of Economics and Statistics, MIT Press, vol. 97(1), pages 71-87, March.
    28. Anne-Marie Brook & Edward Whitehouse, 2006. "The Turkish Pension System: Further Reforms to Help Solve the Informality Problem," OECD Social, Employment and Migration Working Papers 44, OECD Publishing.
    29. Krueger, Alan B & Pischke, Jorn-Steffen, 1992. "The Effect of Social Security on Labor Supply: A Cohort Analysis of the Notch Generation," Journal of Labor Economics, University of Chicago Press, vol. 10(4), pages 412-437, October.
    30. Andrew Gelman & Guido Imbens, 2019. "Why High-Order Polynomials Should Not Be Used in Regression Discontinuity Designs," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 37(3), pages 447-456, July.
    31. Costa, Dora L, 1998. "The Evolution of Retirement: Summary of a Research Project," American Economic Review, American Economic Association, vol. 88(2), pages 232-236, May.
    32. Kahn, James A., 1988. "Social security, liquidity, and early retirement," Journal of Public Economics, Elsevier, vol. 35(1), pages 97-117, February.
    33. Blundell, R. & French, E. & Tetlow, G., 2016. "Retirement Incentives and Labor Supply," Handbook of the Economics of Population Aging, in: Piggott, John & Woodland, Alan (ed.), Handbook of the Economics of Population Aging, edition 1, volume 1, chapter 0, pages 457-566, Elsevier.
    34. Robin L. Lumsdaine & James H. Stock & David A. Wise, 1996. "Why Are Retirement Rates So High at Age 65?," NBER Chapters, in: Advances in the Economics of Aging, pages 61-82, National Bureau of Economic Research, Inc.
    35. Sebastian Calonico & Matias D. Cattaneo & Max H. Farrell & Roc ́ıo Titiunik, 2017. "rdrobust: Software for regression-discontinuity designs," Stata Journal, StataCorp LP, vol. 17(2), pages 372-404, June.
    36. McCrary, Justin, 2008. "Manipulation of the running variable in the regression discontinuity design: A density test," Journal of Econometrics, Elsevier, vol. 142(2), pages 698-714, February.
    37. Cunningham, Wendy V & Maloney, William F, 2001. "Heterogeneity among Mexico's Microenterprises: An Application of Factor and Cluster Analysis," Economic Development and Cultural Change, University of Chicago Press, vol. 50(1), pages 131-156, October.
    38. van der Klaauw, Wilbert & Wolpin, Kenneth I., 2008. "Social security and the retirement and savings behavior of low-income households," Journal of Econometrics, Elsevier, vol. 145(1-2), pages 21-42, July.
    39. Hahn, Jinyong & Todd, Petra & Van der Klaauw, Wilbert, 2001. "Identification and Estimation of Treatment Effects with a Regression-Discontinuity Design," Econometrica, Econometric Society, vol. 69(1), pages 201-209, January.
    40. Callaway, Brantly & Sant’Anna, Pedro H.C., 2021. "Difference-in-Differences with multiple time periods," Journal of Econometrics, Elsevier, vol. 225(2), pages 200-230.
    41. Dora L. Costa, 1995. "Pensions and Retirement: Evidence from Union Army Veterans," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(2), pages 297-319.
    42. David M. Blau & Ryan M. Goodstein, 2010. "Can Social Security Explain Trends in Labor Force Participation of Older Men in the United States?," Journal of Human Resources, University of Wisconsin Press, vol. 45(2).
    43. Matias D. Cattaneo & Michael Jansson & Xinwei Ma, 2018. "Manipulation testing based on density discontinuity," Stata Journal, StataCorp LP, vol. 18(1), pages 234-261, March.
    44. Arthur Seibold, 2021. "Reference Points for Retirement Behavior: Evidence from German Pension Discontinuities," American Economic Review, American Economic Association, vol. 111(4), pages 1126-1165, April.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Blundell, R. & French, E. & Tetlow, G., 2016. "Retirement Incentives and Labor Supply," Handbook of the Economics of Population Aging, in: Piggott, John & Woodland, Alan (ed.), Handbook of the Economics of Population Aging, edition 1, volume 1, chapter 0, pages 457-566, Elsevier.
    2. Giesecke, Matthias & Jäger, Philipp, 2021. "Pension incentives and labor supply: Evidence from the introduction of universal old-age assistance in the UK," Journal of Public Economics, Elsevier, vol. 203(C).
    3. Itay Saporta-Eksten & Ity Shurtz & Sarit Weisburd, 2021. "Social Security, Labor Supply, and Health of Older Workers: Quasi-Experimental Evidence from a Large Reform [Identification and Estimation of Local Average Treatment Effects]," Journal of the European Economic Association, European Economic Association, vol. 19(4), pages 2168-2208.
    4. Oh, Byeung-Kuk, 2024. "Retirement and healthcare utilization: Evidence from pension eligibility ages in South Korea," The Journal of the Economics of Ageing, Elsevier, vol. 27(C).
    5. Staubli, Stefan & Lalive, Rafael & Magesan, Arvind, 2020. "The Impact of Social Security on Pension Claiming and Retirement: Active vs. Passive Decisions," CEPR Discussion Papers 15120, C.E.P.R. Discussion Papers.
    6. Salim Atay & Gunes A. Asik & Semih Tumen, 2024. "Impact of Graduating with Honours on Entry Wages of Economics Majors," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 86(3), pages 606-640, June.
    7. Burgherr, David, 2022. "Behavioral Responses to a Pension Savings Mandate : Quasi-experimental Evidence from Swiss Tax Data," CAGE Online Working Paper Series 645, Competitive Advantage in the Global Economy (CAGE).
    8. Malkova, Olga, 2020. "Did Soviet elderly employment respond to financial incentives? Evidence from pension reforms," Journal of Public Economics, Elsevier, vol. 182(C).
    9. Mauricio Villamizar‐Villegas & Freddy A. Pinzon‐Puerto & Maria Alejandra Ruiz‐Sanchez, 2022. "A comprehensive history of regression discontinuity designs: An empirical survey of the last 60 years," Journal of Economic Surveys, Wiley Blackwell, vol. 36(4), pages 1130-1178, September.
    10. Barbara Engels & Johannes Geyer & Peter Haan, 2016. "Pension Incentives and Early Retirement," Discussion Papers of DIW Berlin 1617, DIW Berlin, German Institute for Economic Research.
    11. Gunes Asik, 2018. "Impact of early retirement incentives on labor supply of young men and women : evidence from Turkey," Working Papers 20180002, UMR Développement et Sociétés, Université Paris 1 Panthéon-Sorbonne, Institut de Recherche pour le Développement.
    12. Nian, Yongwei, 2023. "Incentives, penalties, and rural air pollution: Evidence from satellite data," Journal of Development Economics, Elsevier, vol. 161(C).
    13. Frank van Erp & Niels Vermeer & Daniel van Vuuren, 2013. "Non-financial determinants of retirement," CPB Discussion Paper 243.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    14. Bernal Lobato, N., 2014. "Essays in applied microeconomics," Other publications TiSEM 9b638b3d-2f83-452a-b2c8-c, Tilburg University, School of Economics and Management.
    15. Eric French & John Bailey Jones, 2017. "Health, Health Insurance, and Retirement: A Survey," Annual Review of Economics, Annual Reviews, vol. 9(1), pages 383-409, September.
    16. Gaggero, A. & Gil, J. & Jiménez-Rubio, D. & Zucchelli, E., 2021. "Health information and lifestyle behaviours: the impact of a diabetes diagnosis," Health, Econometrics and Data Group (HEDG) Working Papers 21/02, HEDG, c/o Department of Economics, University of York.
    17. Luciana Juvenal & Paulo Santos Monteiro, 2024. "Risky Gravity," Journal of the European Economic Association, European Economic Association, vol. 22(4), pages 1590-1627.
    18. Gurgand, Marc & Lorenceau, Adrien & Mélonio, Thomas, 2023. "Student loans: Credit constraints and higher education in South Africa," Journal of Development Economics, Elsevier, vol. 161(C).
    19. Crespo Cristian, 2020. "Beyond Manipulation: Administrative Sorting in Regression Discontinuity Designs," Journal of Causal Inference, De Gruyter, vol. 8(1), pages 164-181, January.
    20. Alexander M. Danzer, 2013. "Benefit Generosity and the Income Effect on Labour Supply: Quasi‐Experimental Evidence," Economic Journal, Royal Economic Society, vol. 123, pages 1059-1084, September.

    More about this item

    Keywords

    Retirement; Pension reforms; Labor Markets; Informality;
    All these keywords.

    JEL classification:

    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
    • J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
    • K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law

    Statistics

    Access and download statistics

    Corrections

    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:eee:labeco:v:90:y:2024:i:c:s0927537124000563. See general information about how to correct material in RePEc.

    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 bibliographic 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/labeco .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.