Early Retirement: Free Choice or Forced Decision?

27 Pages Posted: 24 Oct 2005

See all articles by David Dorn

David Dorn

University of Zurich - Department of Economics; Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics; CESifo (Center for Economic Studies and Ifo Institute)

Alfonso Sousa-Poza

University of Hohenheim - Institute of Household and Consumer Economics; IZA Institute of Labor Economics

Date Written: September 2005

Abstract

Early retirement is usually explained as a supply-side phenomenon. However, early retirement can also be a demand-side phenomenon arising from a firm's profit maximization behavior. This paper analyzes voluntary and involuntary early retirement based on international microdata covering 19 industrialized countries. The results indicate that generous early retirement provisions of the social security system do not only make voluntary early retirement more attractive for individuals, but also induce firms to encourage more employees to retire early. In particular, firms seem to use early retirement to reduce staff during economic recessions and as a means to circumvent employment protection legislation.

Keywords: early retirement, involuntary early retirement, social security, pensions

JEL Classification: J14, J21, J22, J26

Suggested Citation

Dorn, David and Sousa-Poza, Alfonso, Early Retirement: Free Choice or Forced Decision? (September 2005). CESifo Working Paper Series No. 1542. Available at SSRN: https://ssrn.com/abstract=831486

David Dorn (Contact Author)

University of Zurich - Department of Economics ( email )

Z├╝rich
Switzerland

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

IZA Institute of Labor Economics

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

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Alfonso Sousa-Poza

University of Hohenheim - Institute of Household and Consumer Economics ( email )

Fruwirthstrasse 48
Kavaliershaus 4 116
70599 Stuttgart
Germany
++49 (0)711/459-22863 (Phone)
++49 (0)711/459-23953 (Fax)

HOME PAGE: http://www.uni-hohenheim.de/hhoek/englisch/people/alfonsosousapoza/index.html

IZA Institute of Labor Economics

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

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