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

32 Pages Posted: 19 Jul 2011

See all articles by Giovanni Mastrobuoni

Giovanni Mastrobuoni

University of Turin - Collegio Carlo Alberto; University of Essex - Department of Economics; IZA

Filippo Taddei

School of Advanced International Studies (SAIS) - The Johns Hopkins University

Date Written: May 1, 2011

Abstract

We show how the age profile of earnings, retirement rules and retirement behavior are tightly linked through the general equilibrium of the economy. Generous Social Security benefits financed by large Social Security taxes discourage human capital accumulation. In Social Security systems where Social Security benefits prioritize redistribution less productive workers with lower levels of human capital tend to retire earlier. These outflows of workers from the labor force tend to generate wage profiles 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 profile of earnings, and retirement behavior are related.

Keywords: social security tax, early retirement, age pro le of earnings, human capital, seniority premium

JEL Classification: H53, H55, D72

Suggested Citation

Mastrobuoni, Giovanni and Taddei, Filippo, Age Before Beauty? Productivity and Work vs. Seniority and Early Retirement (May 1, 2011). Netspar Discussion Paper No. 05/2011-062. Available at SSRN: https://ssrn.com/abstract=1889054 or http://dx.doi.org/10.2139/ssrn.1889054

Giovanni Mastrobuoni (Contact Author)

University of Turin - Collegio Carlo Alberto ( email )

Piazza Arbarello 8
Torino, Torino 10122
Italy

HOME PAGE: http://www.carloalberto.org/people/faculty/assistant-professors-and-chairs/mastrobuoni/

University of Essex - Department of Economics ( email )

Wivenhoe Park
Colchester CO4 3SQ
United Kingdom

IZA ( email )

Filippo Taddei

School of Advanced International Studies (SAIS) - The Johns Hopkins University ( email )

via Andreatta, 3
Bologna, Bologna
Italy

HOME PAGE: http://https://www.sais-jhu.edu/filippo-taddei

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