IDEAS home Printed from https://ideas.repec.org/p/fer/dpaper/260.html
   My bibliography  Save this paper

Let's Make a Deal - the Impact of Social Security Provisions and Firm Liabilities on Early Retirement

Author

Listed:
  • Hakola, Tuulia
  • Uusitalo, Roope

Abstract

Literature on early retirement has generally ignored firms' role in the labour market withdrawals. Yet, as it is shown in this paper, employee incentives alone cannot explain the increase in unemployment at the end of the career. Instead, we construct an implicit contracts model where we account for both the firm and the worker incentives. Displacements occur only when joint utility of the two parties are greater for displacement than for continued employment. We use a firm-worker -panel to test two implications of our model. First, we find that firms target their layoffs on employees who lose least when displaced. This targeting is more frequent in firms in financial distress and during a recession. Second, we find that a change in a disability risk affects also the displacement probability. This is due to differences in experience rating for the disability and unemployment pensions.

Suggested Citation

  • Hakola, Tuulia & Uusitalo, Roope, 2001. "Let's Make a Deal - the Impact of Social Security Provisions and Firm Liabilities on Early Retirement," Discussion Papers 260, VATT Institute for Economic Research.
    • Handle: RePEc:fer:dpaper:260
    as

    Download full text from publisher

    File URL: https://www.doria.fi/handle/10024/148161
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Topel, Robert H, 1984. "Experience Rating of Unemployment Insurance and the Incidence of Unemployment," Journal of Law and Economics, University of Chicago Press, vol. 27(1), pages 61-90, April.
    2. John Rust & Christopher Phelan, 1997. "How Social Security and Medicare Affect Retirement Behavior in a World of Incomplete Markets," Econometrica, Econometric Society, vol. 65(4), pages 781-832, July.
    3. Kyyrä, Tomi & Korkeamäki, Ossi, 2000. "Integrated Panel of Finnish Companies and Workers," Discussion Papers 226, VATT Institute for Economic Research.
    4. Lumsdaine, Robin L. & Mitchell, Olivia S., 1999. "New developments in the economic analysis of retirement," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 49, pages 3261-3307, Elsevier.
    5. Hall, Robert E & Lazear, Edward P, 1984. "The Excess Sensitivity of Layoffs and Quits to Demand," Journal of Labor Economics, University of Chicago Press, vol. 2(2), pages 233-257, April.
    6. Feldstein, Martin S, 1978. "The Effect of Unemployment Insurance on Temporary Layoff Unemployment," American Economic Review, American Economic Association, vol. 68(5), pages 834-846, December.
    7. Pablo Antolín & Stefano Scarpetta, 1998. "Microeconometric Analysis of the Retirement Decision: Germany," OECD Economics Department Working Papers 204, OECD Publishing.
    8. Hutchens, Robert, 1999. "Social Security Benefits and Employer Behavior: Evaluating Social Security Early Retirement Benefits as a Form of Unemployment Insurance," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(3), pages 659-678, August.
    9. Hakola, Tuulia, 2000. "Navigating through the Finnish Pension System," Discussion Papers 224, VATT Institute for Economic Research.
    10. Feldstein, Martin S, 1976. "Temporary Layoffs in the Theory of Unemployment," Journal of Political Economy, University of Chicago Press, vol. 84(5), pages 937-957, October.
    11. Stock, James H & Wise, David A, 1990. "Pensions, the Option Value of Work, and Retirement," Econometrica, Econometric Society, vol. 58(5), pages 1151-1180, September.
    12. Maarten Lindeboom, 1998. "Microeconometric Analysis of the Retirement Decision: The Netherlands," OECD Economics Department Working Papers 207, OECD Publishing.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Erkki Koskela & Roope Uusitalo, 2003. "The Un-Intended Convergence: How the Finnish Unemployment Reached the European Level," CESifo Working Paper Series 878, CESifo.
    2. International Monetary Fund, 2007. "Finland: Selected Issues," IMF Staff Country Reports 2007/278, International Monetary Fund.
    3. Kyyrä, Tomi & Wilke, Ralf A., 2006. "Reduction in the Long-Term Unemployment of the Elderly: A Success Story from Finland Revised," Discussion Papers 396, VATT Institute for Economic Research.

    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. Hakola, Tuulia, 2002. "Economic Incentives and Labour Market Transitions of the Aged Finnish Workforce," Research Reports 89, VATT Institute for Economic Research.
    2. Daniel Hallberg, 2011. "Economic Fluctuations and Retirement of Older Employees," LABOUR, CEIS, vol. 25(3), pages 287-307, September.
    3. Hakola, Tuulia & Uusitalo, Roope, 2005. "Not so voluntary retirement decisions? Evidence from a pension reform," Journal of Public Economics, Elsevier, vol. 89(11-12), pages 2121-2136, December.
    4. Albanese, Andrea & Picchio, Matteo & Ghirelli, Corinna, 2020. "Timed to Say Goodbye: Does Unemployment Benefit Eligibility Affect Worker Layoffs?," Labour Economics, Elsevier, vol. 65(C).
    5. Erik Meijer & Arie Kapteyn & Tatiana Andreyeva, 2008. "Health Indexes and Retirement Modeling in International Comparisons," Working Papers 614, RAND Corporation.
    6. H. Benitez-Silva & F. Heiland, 2008. "Early claiming of social security benefits and labour supply behaviour of older Americans," Applied Economics, Taylor & Francis Journals, vol. 40(23), pages 2969-2985.
    7. Joshua Congdon-Hohman, 2018. "Retirement Reversals and Health Insurance," Public Finance Review, , vol. 46(4), pages 583-608, July.
    8. Adriaan Kalwij & Frederic Vermeulen, 2008. "Health and labour force participation of older people in Europe: What do objective health indicators add to the analysis?," Health Economics, John Wiley & Sons, Ltd., vol. 17(5), pages 619-638, May.
    9. John Laitner, 2003. "Labor Supply Responses to Social Security," Working Papers wp050, University of Michigan, Michigan Retirement Research Center.
    10. Simon Jäger & Benjamin Schoefer & Josef Zweimüller, 2023. "Marginal Jobs and Job Surplus: A Test of the Efficiency of Separations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 90(3), pages 1265-1303.
    11. Krueger, Alan B. & Meyer, Bruce D., 2002. "Labor supply effects of social insurance," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 33, pages 2327-2392, Elsevier.
    12. Kalwij, A.S. & Vermeulen, F.M.P., 2005. "Labour Force Participation of the Elderly in Europe : The Importance of Being Healthy," Other publications TiSEM c00729b8-27dc-42f8-9fba-0, Tilburg University, School of Economics and Management.
    13. Hakola, Tuulia, 2002. "Alternative Approaches to Model Withdrawals from the Labour Market – A Literature Review," Working Paper Series 2003:4, Uppsala University, Department of Economics.
    14. Moller Dano, Anne & Ejrnaes, Mette & Husted, Leif, 2005. "Do single women value early retirement more than single men?," Labour Economics, Elsevier, vol. 12(1), pages 47-71, February.
    15. Petra Todd & Viviana Vélez-Grajales, 2008. "How Pension Rules Affect Work and Contribution Patterns: A Behavioral Model of the Chilean Privatized Pension System," Working Papers wp193, University of Michigan, Michigan Retirement Research Center.
    16. Alan L. Gustman & Thomas L. Steinmeier, 2001. "Retirement and Wealth," NBER Working Papers 8229, National Bureau of Economic Research, Inc.
    17. Luca Spataro, 2002. "New Tools in Micromodeling Retirement Decisions: Overview and Applications to the Italian Case," CeRP Working Papers 28, Center for Research on Pensions and Welfare Policies, Turin (Italy).
    18. Courtney Coile & Jonathan Gruber, 2000. "Social Security and Retirement," NBER Working Papers 7830, National Bureau of Economic Research, Inc.
    19. 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.
    20. Sašo Polanec & Aleš Ahčan & Miroslav Verbič, 2013. "Retirement decisions in transition: microeconometric evidence from Slovenia," Post-Communist Economies, Taylor & Francis Journals, vol. 25(1), pages 99-118, March.

    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:fer:dpaper:260. 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: Anita Niskanen (email available below). General contact details of provider: https://edirc.repec.org/data/vatttfi.html .

    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.