Permanent Wage Cost Subsidies for Older Workers. An Effective Tool for Increasing Working Time and Postponing Early Retirement?

45 Pages Posted: 24 Apr 2015

See all articles by Andrea Albanese

Andrea Albanese

Luxembourg Institute of Socio-Economic Research (LISER); Ghent University; IZA Institute of Labor Economics

Bart Cockx

Ghent University - Sherppa - Faculty of Economics and Business Administration; Institute for the Study of Labor (IZA); CESifo (Center for Economic Studies and Ifo Institute); IRES, Université Catholique de Louvain

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Date Written: April 23, 2015

Abstract

In several OECD countries age-targeted wage subsidies have been introduced to increase the employment of older workers, but evidence on their effectiveness is scarce. This paper examines the effects of a permanent wage cost subsidy in Belgium on the employment rate, working time and hourly wage. We estimate these effects by integrating Inverse Probability Weighting in a, possibly trend-adjusted, Difference-in-Differences of endogenously sampled repeated cross sections. We find small positive short-run impacts on working time and larger ones on the employment rate, but only for employees at high risk of leaving to early retirement. The wage is not affected.

Keywords: wage cost subsidies, older workers, Weighted Difference-in-Differences, endogenous sampling

JEL Classification: J140, C210, J180, J300

Suggested Citation

Albanese, Andrea and Cockx, Bart L. W., Permanent Wage Cost Subsidies for Older Workers. An Effective Tool for Increasing Working Time and Postponing Early Retirement? (April 23, 2015). CESifo Working Paper Series No. 5301, Available at SSRN: https://ssrn.com/abstract=2598003 or http://dx.doi.org/10.2139/ssrn.2598003

Andrea Albanese

Luxembourg Institute of Socio-Economic Research (LISER)

11 Porte des Sciences
Esch-sur-Alzette, L-4366
Luxembourg

Ghent University ( email )

Ghent, B-9000
Belgium

IZA Institute of Labor Economics ( email )

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

Bart L. W. Cockx (Contact Author)

Ghent University - Sherppa - Faculty of Economics and Business Administration ( email )

Ghent, B-9000
Belgium

Institute for the Study of Labor (IZA)

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

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

IRES, Université Catholique de Louvain

Place Montesquieu, 3
Louvain-la-Neuve
Belgium

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