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http://ssrn.com/abstract=708187
 
 

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The Benefits of Separating Early Retirees from the Unemployed: Simulation Results for Belgian Wage Earners


Raphael Desmet


Federal Planning Bureau, Belgium

Alain Jousten


University of Liege - Department of Economics; Institute for the Study of Labor (IZA); Netspar; International Monetary Fund (IMF)

Sergio Perelman


University of Liege - Department of Economics

April 2005

IZA Discussion Paper No. 1571

Abstract:     
The pool of early retirees is characterized by a large heterogeneity along several criteria. The present paper focuses on the key distinction between those in forced early retirement and those who retire early by individual choice. We start by estimating a retirement probit model for older workers in Belgium. Based on these estimates, we then perform micro-simulations relating to a hypothetical actuarial reform of a pension system, i.e., a reform imposing on average actuarial neutrality with respect to the time of retirement. We explore two scenarios, one where the entire population is subjected to the actuarial system, and one where a duly screened sub-sample of the unemployed is shielded against these actuarial adjustment factors, a group we call the truly unemployed. We evaluate the impact on the average retirement age, the pension budgets as well as indicators of redistribution within the group of the elderly. We find that the extra budgetary gain of exposing this subgroup to the full-blown reform is modest, while the distributional cost is rather high. Our results thus comfort the idea that the budgetary cost of a focused unemployment system are moderate, and that returning the unemployment insurance to its primary role might be a desirable strategy.

Number of Pages in PDF File: 26

Keywords: retirement, older worker, inequality

JEL Classification: H31, I3, J14

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Date posted: April 25, 2005  

Suggested Citation

Desmet, Raphael and Jousten, Alain and Perelman, Sergio, The Benefits of Separating Early Retirees from the Unemployed: Simulation Results for Belgian Wage Earners (April 2005). IZA Discussion Paper No. 1571. Available at SSRN: http://ssrn.com/abstract=708187

Contact Information

Raphael Desmet
Federal Planning Bureau, Belgium ( email )
Alain Jousten (Contact Author)
University of Liege - Department of Economics ( email )
7 Boulevard du Rectorat
Batiment B31
4000 Liege
Belgium
+32 4 366 3198 (Phone)
Institute for the Study of Labor (IZA)
P.O. Box 7240
Bonn, D-53072
Germany
Netspar
P.O. Box 90153
Tilburg, 5000 LE
Netherlands
International Monetary Fund (IMF)
700 19th Street, N.W.
Washington, DC 20431
United States
Sergio Perelman
University of Liege - Department of Economics ( email )
7 Boulevard du Rectorat
Batiment B31
4000 Liege
Belgium
+32 4 156 3098 (Phone)
+32 4 156 2958 (Fax)
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