Job displacement and the transitions to re-employment and early retirement for non-employed older workers

Despite the relatively higher frequency of job displacement among older workers in Europe, little is known about its effect on the work-retirement decision. Employing individual data from the European Community Household Panel for a number of countries with differences in their institutional environments, the effect of job displacement for non-employed workers is identified separately for the transitions into re-employment and retirement. The findings suggest that in countries with relatively more generous unemployment insurance provisions for the older unemployed, which offer a pathway to early retirement, older displaced workers exhibit lower re-employment and higher retirement rates compared to the non-displaced. These results are robust to dynamic selection due to unobserved heterogeneity and to the endogeneity of displacement.     

Hiring Older Employees: Do the Age Limits of Early Retirement and the Contribution Rates of Firms Matter?

We examine the effects of a Finnish pension reform on firms' incentives to hire older employees. The reform restricted the eligibility ages for early retirement and changed the size‐related contribution rates of firms. According to our theoretical model, the positive effect on the values of new hires extends to age groups younger than those directly affected by the reform, and the effects are strongest in the largest firms. These model predictions were confirmed in a difference‐in‐difference‐in‐differences analysis on the probability of the hiring of workers of different ages in firms of different sizes.     

Sick of work or too sick to work? Evidence on self-reported health shocks and early retirement from the BHPS

We follow individuals as they retire using discrete-time hazard models applied to a stock sample from 12 waves of the British Household Panel Survey. We use a generalised ordered probit model to explore the existence of reporting bias and to purge the self-reported measure of health of this bias. This model takes into account the possibility that anticipated retirement may influence reporting of health. There is evidence that health shocks are a determinant of retirement age. This is the case for both men and women and is observed for both health limitations and a measure based on latent health status derived from the generalised ordered probit model. While the size of the health effect varies according to how we measure health, the relative effect is large compared to the other variables, and in particular when compared to the effects of private pensions. However numerical simulations show that this high hazard ratio interacts with the, relatively low, incidence of new health limitations among the age group of interest to generate only a modest number of excess early retirements. Further, our results do not show evidence that the health status of their partner affects the hazard of early retirement for both men and women. Having an employed partner does reduce the hazard of early retirement.     

Entrepreneurship and unemployment: A nonlinear bidirectional causality?

This paper tests the view that the relation between unemployment and entrepreneurship is dynamic and possibly nonlinear. It performs Granger-causality tests and STAR-EXT estimation to assess the causality direction and the nonlinear nature of the relation for a set of OECD countries. The results reveal a bidirectional and nonlinear relation between business creation and changes in unemployment.     

Risk Taking in Asymmetric Tournaments

Abstract. A tournament is examined in which two agents with different abilities choose efforts as well as risks. According to the previous literature, the more (less) able agent should choose a low (high) risk strategy, because the first one does not want to imperil his favorable position, whereas the last one can only gain by increasing risk. We show that this is not necessarily true. Risk taking affects equilibrium efforts as well as winning probabilities. Depending on both effects diverse equilibria are possible. For example, the low and the high ability agent may both choose high risks or both choose low risks.     

Worker Absenteeism in Search Equilibrium*

In this paper we introduce a general equilibrium model of search unemployment that incorporates absence from work as a distinct labor force state. Absenteeism is driven by random shocks to the value of leisure that are private information to the workers. Firms maximize profits while recognizing that the compensation package may affect the queue of job applicants and the absence rate. The analysis provides results concerning the effects of social insurance benefits and other determinants of workers' and firms' behavior. The normative analysis identifies externalities associated with firm‐provided sick pay and examines the welfare implications of alternative policies.     

The risk and cost of job loss in Canada, 1978–2008

We assess the risk and cost of worker displacement in Canada over the last three decades. We show that neither the risk of job loss nor the short‐term earnings losses of displaced workers trended upwards during that period. However, short‐term earnings losses of workers displaced from manufacturing increased in recent years, as a smaller proportion found a post‐displacement job in that sector. In line with Stevens ( 1997 ) and Couch and Placzek ( 2010 ), we find that high‐seniority workers and individuals with stable labour market attachment experienced, five years after displacement, earnings losses that ranged between 10% and 18%.     

Changes in job security and their causes: An empirical analysis for France, 1982-2002

In this paper, we analyze the changes in the risks of involuntary job loss in France between 1982 and 2002. We find that these risks are higher in the 1990s than they were in the 1980s. We develop an econometric analysis to separate the effects of institutional changes from the effects of new technologies. Our estimates show that the rise in job loss rates is significantly more pronounced in industries that have the largest share of R&D workers and the largest rate of new technologies’ users. These findings suggest that technological changes contribute to decreasing the incentive to keep workers for long period of time and to increasing job insecurity.     

Sectoral Transformation, Turbulence and Labor Market Dynamics in Germany

Abstract. This paper analyzes the interaction between structural change and labor market dynamics in West Germany, during a period when industrial employment declined by more than 30% and service sector employment more than doubled. Using transition data on individual workers, we document a marked increase in structural change and turbulence, in particular since 1990. Net employment changes resulted partly from an increase in gross flows, but also from an increase in the net transition 'yield' at any given gross worker turnover. In growing sectors, net structural change was driven by accessions from non-participation rather than unemployment; contracting sectors reduced their net employment primarily via lower accessions from non-participation. German reunification and Eastern enlargement appear to have contributed significantly to this accelerated pace of structural change.     

Is job insecurity on the rise? Evidence from Canadian perception data

Abstract .  This paper examines the unexplored issue of worker insecurity perception in Canada. Specifically, we explore for changes in worker perceptions of job security using Canadian Gallup data for the 1977–2006 period. We find that the high levels of perceived insecurity of the early to mid-1990s were only cyclical in nature, not evidence of structural change. We also explore for differences across socio-economic groups and find that university educated workers, full-time workers, and white-collar workers all felt relatively more secure about present and future job prospects. Interestingly, union members tend to be more concerned about job security (than non-union).     

The source of the new Canadian job stability patterns

This paper explores the causes of recent changes in Canadian job stability. Using the Labour Force Survey master files (1977–2010), I find that the increases in job stability first observed in the 1990s were, in fact, long lasting. Results indicate that compositional changes and the increased job stability of women within age and education groups play important roles in explaining the aggregate job stability patterns that emerge.     

Stock-flow matching and the performance of the labor market

We estimate outflow equations for vacancies and unemployed workers in Britain, departing from the stock-based analysis of matching in two ways. First, we deal with the temporal aggregation problem that arises when discrete time data are used to describe continuous time processes. Second, we allow for a stock-flow matching mechanism in which the stock of traders on one side of the market matches with the flow of traders on the other side. Our estimates are in line with the predictions of stock-flow matching in terms of higher exit rates of flows and of matching combinations between labor market stocks and flows. Furthermore, employer search effectiveness did not seem to decline between the 1960s and the 1990s. Nevertheless, some deterioration in worker search effectiveness is detected, however less severe than that implied by previous, stock-based work.     

The effects of employment protection: Learning from variable enforcement

Employment protection legislation (EPL) is not enforced uniformly across the board. There are a number of exemptions to the coverage of these provisions: firms below a given threshold scale and workers with temporary contracts are not subject to the most restrictive provisions. This within-country variation in enforcement allows us to make inferences on the impact of EPL which go beyond the usual cross-country approach. In this paper we develop a simple model which explains why these exemptions are in place to start with. Then we empirically assess the effects of EPL on dismissal probabilities and on the equilibrium size distribution of firms. Our results are in line with the predictions of the theoretical model. Workers under permanent contracts in firms with less restrictive EPL are more likely to be dismissed. However, there is no effect of the exemption threshold on the growth of firms.     

WAGES,HOURS OF WORK AND JOB SATISFACTION OF RETIREMENT‐AGE WORKERS*

I analyse, theoretically and empirically, the effects of pension benefits, family conditions and the personal characteristics of older individuals on their labour supply, wages, hours worked and job satisfaction, in the framework of the Nash bargaining condition whereby an older worker and a firm bargain over employment conditions such as wages, hours of work and job investment. It is stressed that as workers become older they tend to give greater priority to the number of hours worked, work environment and type of job than to wages, and try to improve these through job investment, even at the cost of lower wages.     

Taxation of early retirement windows and delaying retirement: The French experience

This paper investigates the effect of the 2003 French pension reform on hiring, firing and employment rates among older workers. This reform increased the mandatory retirement age and simultaneously it set a tax levied on early retirement windows paid by firms to their older workers, to encourage them to leave their job early. We use a matching model with endogenous job destruction extended to account for a mandatory retirement age and we calibrate the model with data drawn from the French Labor Force Surveys for the years 2002 and 2003. We show that in the case of a high tax rate, delaying retirement raises job separation rates, which partially offsets its positive effect on job finding rates. Consequently, the combination of an increase in the retirement age and a taxation on early retirement windows may have negative effects on the employment rate among older workers.     

Weak exogeneity in partially nonstationary models

This paper is dedicated to analysing the conditions for weak exogeneity in partially nonstationary models. After adopting a particular identification regime which is based on a triangularization of the parameters of the cointegration relations, we show that the conditions for weak exogeneity developed in the literature can be stated in terms of the parameters of the so-called structural form. This alternative presentation of the conditions permits new interpretations and provides fresh insights on how to test the exogeneity hypothesis.     

Termination of dynamic contracts in an equilibrium labor market model

In an equilibrium model of the labor market, workers and firms enter into dynamic contracts that can potentially last forever, but are subject to optimal terminations. Upon termination, the firm hires a new worker, and the worker who is terminated receives a termination contract from the firm and is then free to go back to the labor market to seek new employment opportunities and enter into new dynamic contracts. The model permits only two types of equilibrium terminations that resemble, respectively, the two kinds of labor market separations that are typically observed in practice: involuntary layoffs and voluntary retirements. The model allows for the simultaneous determination of a large set of important labor market variables including equilibrium unemployment and labor force participation. An algorithm is formulated for computing the model's equilibria. I then simulate the model to show quantitatively that the model is consistent with a set of important stylized facts of the labor market.     

Does the sophistication of use of unemployment insurance evolve with experience?

Abstract The subject of this paper is the repeat use of UI/EI benefits in Canada. The first objective is to investigate empirically the pattern of adjustment that UI users exhibit over a multiple claim horizon. Our secondary objective is to investigate a behavioural channel that might potentially underlie observed adjustment effects, namely, individual learning effects. We estimate an econometric model of how certain features of their claims change as they file subsequent claims. We find strong empirical patterns suggesting that there does appear to be some sort of an adjustment process; beneficiaries tend to approach a desired value for these particular facets of their UI claims. There appears to be some process of growing sophistication of UI use – which some might label ‘gaming the system’– reflecting the adjustment of claims and the concomitant employment patterns to the provisions and rules of the regime. We also uncover evidence in favour of the existence of individual learning effects.     

Short-time work—Some long-run implications

This paper outlines a simple model to examine some long-run implications of short-time work schemes (STWs) on labor market performance and welfare. It is not clear that STWs reduce unemployment as the induced wage push discourages job creation.     

The ins and outs of unemployment in Canada, 1976–2008

Abstract This paper studies the flows into and out of unemployment in Canada at an aggregate and a number of disaggregated levels. I find that inflows into unemployment are countercyclical and outflows are procyclical. At an aggregate level, changes in the rate at which individuals leave unemployment account for most of the changes in unemployment rates in Canada between 1976 and 2008. However, flows into unemployment matter more at some disaggregated levels. There are also some differences in the contributions of flows into and out of unemployment to changes in unemployment rates across the 1981–82 and 1990–92 recessions.