Too Old To Work, Too Young To Retire?
Abstract
We study whether employment prospects of old and young workers
differ after a plant closure. Using Austrian administrative data, we
show that old and young workers face similar displacement costs in
terms of employment in the long-run, but old workers lose considerably
more initially and gain later. We interpret these findings using a
search model with retirement as an absorbing state, that we calibrate
to match the observed patterns. Our finding is that the dynamics
of relative employment losses of old versus young workers after a displacement
are mainly explained by different opportunities of transition
into retirement. In contrast, differences in layoff rates and job offer
arrival rates cannot explain these patterns. Our results support the
idea that retirement incentives, more than weak labor demand, are
responsible for the low employment rates of older workers.
Domains
Economics and Finance
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