Working Time Reductions at the End of the Career. Do They Prolong the Time Spent in Employment?

52 Pages Posted: 11 Feb 2016

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

Yannick Thuy

Ghent University

Multiple version iconThere are 2 versions of this paper

Date Written: January 14, 2016

Abstract

In this paper we study the effects on the survival rate in employment of a scheme that facilitates gradual retirement through working time reductions. We use information on the entire labour market career and other observables to control for selection and take dynamic treatment assignment into account. We also estimate a competing risks model considering different (possibly selective) pathways to early retirement. We find that participation in the scheme initially prolongs employment, as participants keep accumulating full pension rights. However, as participants become eligible for early retirement subsequently, these larger financial incentives induce them to leave the labour force prematurely. These adverse incentives are stronger for individuals who reduce their working time most. After two (four) years for men (women), the positive effects reverse. The more favourable effect for women is likely a consequence of their lower opportunities to enter early retirement. The gradual retirement scheme fails the cost-benefit test.

Keywords: part-time work, older workers, inverse probability weighting, dynamic selection into treatment, endogenous sampling

JEL Classification: J140, C220, J180, J220

Suggested Citation

Albanese, Andrea and Cockx, Bart L. W. and Thuy, Yannick, Working Time Reductions at the End of the Career. Do They Prolong the Time Spent in Employment? (January 14, 2016). CESifo Working Paper Series No. 5695, Available at SSRN: https://ssrn.com/abstract=2731081 or http://dx.doi.org/10.2139/ssrn.2731081

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

Yannick Thuy

Ghent University

Coupure Links 653
Gent, 9000
Belgium

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