Youth Unemployment and Retirement of the Elderly: The Case of Italy

55 Pages Posted: 6 Dec 2008

See all articles by Agar Brugiavini

Agar Brugiavini

Ca Foscari University of Venice - Dipartimento di Economia

Franco Peracchi

University of Rome Tor Vergata - Department of Economics and Finance; University of Rome Tor Vergata - Centre for International Studies on Economic Growth (CEIS); EIEF

Date Written: July 1, 2008

Abstract

This paper shows that the "lump of labor" assumption fails in Italy. The direct relationship between the unemployment rate of the young and the labor force participation of the old is pro-cyclical, i.e. a higher labor force participation of the old is related to a lower unemployment rate of the young. Hence both vary with the business cycle. In order to overcome endogeneity problems in explaining unemployment of the young, we resort to a simulated variable: "the inducement to retire", which is constructed by simulating the social security benefits. We related the unemployment rate of the young to this incentive measure and find that a higher inducement to retire is associated to a higher unemployment rate - quite the opposite of the "young-in-old-out" story.

Keywords: lump of labour, youth unemployment, early retirement

JEL Classification: H3, J2, J6

Suggested Citation

Brugiavini, Agar and Peracchi, Franco, Youth Unemployment and Retirement of the Elderly: The Case of Italy (July 1, 2008). University Ca' Foscari of Venice, Dept. of Economics Research Paper Series No. 45/WP/2008, Available at SSRN: https://ssrn.com/abstract=1311211 or http://dx.doi.org/10.2139/ssrn.1311211

Agar Brugiavini (Contact Author)

Ca Foscari University of Venice - Dipartimento di Economia ( email )

Cannaregio 873
Venice, 30121
Italy

Franco Peracchi

University of Rome Tor Vergata - Department of Economics and Finance ( email )

Via di Tor Vergata
Rome, Lazio 00133
Italy

University of Rome Tor Vergata - Centre for International Studies on Economic Growth (CEIS) ( email )

Via Columbia, 2
Rome, I-00133
Italy

EIEF ( email )

via Sallustiana 62
Rome, 00187
Italy

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