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Age Before Beauty? Productivity and Work vs. Seniority and Early Retirement

Giovanni Mastrobuoni () and Filippo Taddei

No 120, CeRP Working Papers from Center for Research on Pensions and Welfare Policies, Turin (Italy)

Abstract: We show how the age pro le of earnings, retirement rules and retirement behavior are tightly linked through the general equilibrium of the economy. Generous Social Security bene ts nanced by large Social Security taxes discourage human capital accumulation. In Social Security systems where Social Security bene ts prioritize redistribution less productive workers with lower levels of human capital tend to retire earlier. These out ows of workers from the labor force tend to generate wage pro les that are monotonically increasing over age and labor markets that display larger seniority premia. This paper theoretically rationalizes the links between retirement rules and the wage structures over the life cycle and uses data on European countries to show how social security taxes, the age pro le of earnings, and retirement behavior are related.

Keywords: Social Security tax; early retirement; age pro le of earnings; human capital; seniority premium (search for similar items in EconPapers)
JEL-codes: D72 H53 H55 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2011-05
New Economics Papers: this item is included in nep-age, nep-dge and nep-lab
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