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Declining bargaining power of workers and the rise of early retirement in Europe

Anna Batyra (), David de la Croix (), Olivier Pierrard () and Henri Sneessens ()

No 13-6, GIAM Working Papers from Galatasaray University Economic Research Center

Abstract: We offer an alternative explanation for the decline in labor force participation of senior workers. Typically, tax and transfer explanations have been proposed. On the contrary, a model with imperfectly competitive labor market allows to consider as well the effects of a drop in bargaining power, which would not be possible in a purely neoclassical framework. We find that a decline in the bargaining power of workers, which has taken place in the last four decades, has largely contributed to the rise in inactivity in Europe. However, we need a combination of these two explanations, along with population aging and a fall in the matching efficiency, in order to correctly reproduce the joint evolutions of other labor market variables such as the employment and unemployment rates.

Keywords: Overlapping Generations; Search Unemployment; Labor Force Participation; Ageing; Labor Market Policy and Institutions (search for similar items in EconPapers)
JEL-codes: E24 H55 J26 J64 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2013-05-03
New Economics Papers: this item is included in nep-age, nep-dem, nep-dge, nep-lab, nep-lma and nep-mac
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