Equilibrium Unemployment and Retirement

Jean-Olivier Hairault, Francois Langot and Andre Zylberberg ()

No 6511, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: As a preliminary step, we first provide some new empirical evidence that labor market conditions affect retirement decisions at the individual level: unemployed people are more likely to retire. Our main objective in this paper is then to propose an equilibrium unemployment approach to retirement decisions that allows us to unveil the factors which explain why unemployed workers choose to retire earlier and the conditions under which this behavior is optimal. Two main conclusions emerge: the retirement decision of unemployed workers depends on the labor-market frictions whereas that of employed workers does not; the existence of search externalities makes the retirement age of unemployed workers intrinsically suboptimal. Considering Social Security policy issues, we show that the complete elimination of the implicit tax on continued activity is not necessarily welfare-optimizing in a second best world where the labor market equilibrium suffers from distortions.

Keywords: matching; retirement; Social Security; search (search for similar items in EconPapers)
JEL-codes: H55 J22 J26 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2012-04
New Economics Papers: this item is included in nep-age, nep-dge, nep-lab and nep-lma
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Published - published in: European Economic Review, 2015, 79, 35-58

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Related works:
Journal Article: Equilibrium unemployment and retirement (2015)
Working Paper: Equilibrium unemployment and retirement (2015)
Working Paper: Equilibrium unemployment and retirement (2015)
Working Paper: Equilibrium unemployment and retirement (2015)
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