Equilibrium Unemployment and Retirement

30 Pages Posted: 5 May 2012

See all articles by Jean-Olivier Hairault

Jean-Olivier Hairault

Université Paris I Pantheon-Sorbonne; IZA Institute of Labor Economics

François Langot

University of Angers - Centre d'Etudes Prospectives d'Economie Mathematique Appliquees a la Planification (CEPREMAP); Université du Maine - Groupe d' Analyse des Itineraires et Niveaux Salariaux (GAINS); IZA Institute of Labor Economics

Andre Zylberberg

National Center for Scientific Research (CNRS)

Abstract

As a preliminary step, we first provide some new empirical evidence that labor market conditions affect retirement decisions at the individual level: unemployed people are more likely to retire. Our main objective in this paper is then to propose an equilibrium unemployment approach to retirement decisions that allows us to unveil the factors which explain why unemployed workers choose to retire earlier and the conditions under which this behavior is optimal. Two main conclusions emerge: the retirement decision of unemployed workers depends on the labor-market frictions whereas that of employed workers does not; the existence of search externalities makes the retirement age of unemployed workers intrinsically suboptimal. Considering Social Security policy issues, we show that the complete elimination of the implicit tax on continued activity is not necessarily welfare-optimizing in a second best world where the labor market equilibrium suffers from distortions.

Keywords: search, matching, retirement, Social Security

JEL Classification: J22, J26, H55

Suggested Citation

Hairault, Jean-Olivier and Langot, Francois and Zylberberg, Andre, Equilibrium Unemployment and Retirement. IZA Discussion Paper No. 6511. Available at SSRN: https://ssrn.com/abstract=2051354

Jean-Olivier Hairault (Contact Author)

Université Paris I Pantheon-Sorbonne ( email )

12, place du Panthéon
Paris, IL
France

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Francois Langot

University of Angers - Centre d'Etudes Prospectives d'Economie Mathematique Appliquees a la Planification (CEPREMAP) ( email )

Ecole Normale Superieure
48 boulevard Jourdan
75014 Paris
France

Université du Maine - Groupe d' Analyse des Itineraires et Niveaux Salariaux (GAINS) ( email )

72085 Le Mans Cedex 9
France

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Andre Zylberberg

National Center for Scientific Research (CNRS) ( email )

3, rue Michel-Ange
Paris cedex 16, 75794
France

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
26
Abstract Views
479
PlumX Metrics