The Costs of Early Retirement in the OECD
Tryggvi Thor Herbertsson
University of Reykjavik
J. Michael Orszag
Towers Watson - Reigate (Surrey Office); Institute for the Study of Labor (IZA)
May 10, 2001
IoES Working Paper No. W01:02
Despite substantial increases in longevity, the age of retirement in the industrialized countries has steadily fallen throughout most of the 20th century. In 13 OECD countries, the employment-population ratio of 55-64-year-old males fell by an average of more than 12 percentage points between 1979 and 1998. Similarly, labor force participation rates for those 65 and above have fallen significantly. The economic cost of the low labor market participation, in terms of lost output, benefit payments, and lower tax base is substantial. However, part of the cost of low labor market participation is cyclical or structural and hence separate from the costs of early retirement. This paper develops a simple framework to assess the specific costs of early retirement and applies it using data from the OECD countries.
Number of Pages in PDF File: 18
Keywords: Early retirement, labor supply/demand, foregone output
JEL Classification: H55, J14, J21, J26working papers series
Date posted: June 2, 2001
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