Turbulence and the Employment Experience of Older Workers

Quantitative Economics, Vol. 9(2), July 2018, Pages 735-784.

43 Pages Posted: 7 Dec 2014 Last revised: 3 Aug 2018

See all articles by Etienne Lalé

Etienne Lalé

University of Quebec at Montreal (UQAM) - Université du Québec à Montréal; CIRANO; IZA

Multiple version iconThere are 2 versions of this paper

Date Written: October 1, 2017

Abstract

This paper provides new interpretations of the effects of rising economic turbulence – an increase in the rate of skill depreciation upon job loss – and its interaction with labor market institutions. We have three main results, based on a life-cycle model with labor market frictions and labor force participation decisions. First, rising economic turbulence during the 1970s and 1980s accounts for the decline in employment among older workers in the United States. Second, the interaction between turbulence and institutions explains most of the reduction in labor force participation among older workers in Europe over this period, but ultimately explains little of the rise in unemployment. Third, only a small share of the increase in unemployment can be attributed to the early retirement policies that were implemented in Europe from the 1970s up until the early 1990s. Our analysis indicates that incorporating an operative labor supply choice can pose serious challenges to theories aiming to explain the European unemployment problem.

Keywords: Job Search, Job Loss, Turbulence, European Unemployment, Labor Force Participation

JEL Classification: E24, J21, J64

Suggested Citation

Lalé, Etienne, Turbulence and the Employment Experience of Older Workers (October 1, 2017). Quantitative Economics, Vol. 9(2), July 2018, Pages 735-784.. Available at SSRN: https://ssrn.com/abstract=2534416 or http://dx.doi.org/10.2139/ssrn.2534416

Etienne Lalé (Contact Author)

University of Quebec at Montreal (UQAM) - Université du Québec à Montréal ( email )

CP 8888 Succ Centre Ville
Montréal, Québec H3C3P8
Canada

CIRANO ( email )

2020 rue University, 25th floor
Montreal H3C 3J7, Quebec
Canada

IZA ( email )

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

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