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

46 Pages Posted: 27 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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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: J14, C21, J18, J3

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?. IZA Discussion Paper No. 8988, Available at SSRN: https://ssrn.com/abstract=2598928 or http://dx.doi.org/10.2139/ssrn.2598928

Andrea Albanese (Contact Author)

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

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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