English, Article, Journal or magazine article edition: Social security and the search behaviour of workers approaching retirement J. Ignacio García Pérez; José Ignacio García; Alfonso R. Sánchez Martín

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Bookmark: http://trove.nla.gov.au/version/160837
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Social security and the search behaviour of workers approaching retirement
Author
  • J. Ignacio García Pérez
  • José Ignacio García
  • Alfonso R. Sánchez Martín
Physical Description
  • preprint
Notes
  • This paper explores the links between unemployment, retirement and their associated public insurance programs. It is a contribution to a growing body of literature focused on a better understanding of the labor behavior of advanced-age workers, which has gained importance as the pension crisis looms. It also contributes to the literature of optimal unemployment insurance by exploring the interaction of unemployment benefits and retirement pensions. The analysis combines the development of a new theoretical model and a detailed exploration of the empirical regularities using the Spanish Muestra Continua de Vidas Laborales (MCVL) dataset. The model is an extension of the standard search model, designed to reproduce the non-stationary environment faced by workers of advanced ages (in the age range 50/​65). Via calibrated simulations we show that the basic empirical re-employment and retirement patterns can be considered as rational responses to both the labor market conditions and the institutional incentives. Generous Unemployment Benefits (for durations of up to two years) together with very significant early retirement penalties, make optimal to stay unemployed without searching for large groups of unemployed workers. This moral hazard problem can be substantially alleviated through institutional reform. We explore several potential reforms and find that changing the details of early retirement pensions seems more promising than changing the Unemployment Benefit system.
  • Unemployment, Retirement, Search models
  • RePEc:pab:wpaper:08.03
  • This paper explores the links between unemployment, retirement and their associated public insurance programs. It is a contribution to a growing body of literature focused on a better understanding of the labor behavior of advanced—age workers, which has gained importance as the pension crisis looms. The analysis combines the development of a new theoretical model and a detailed exploration of the empirical regularities using the Spanish Muestra Continua de Vidas Laborales (MCVL) dataset. The model is a extension of the standard search model, designed to reproduce the non—stationary environment faced by workers approaching retirement and to explore the interaction of unemployment benefits and retirement pensions. Via calibrated simulations we show that the basic empirical reemployment and retirement patterns can be rationalized as the optimal responses to both the labor market conditions and the institutional incentives. Generous Unemployment Benefits (for durations of up to two years) together with very significant early retirement penalties, make optimal to stay unemployed without searching for large groups of unemployed workers. This moral hazard problem can he substantially alleviated through institutional reform. Setting the early retirement penalties according to the age when the individual withdraws from the labor force (rather than when he/​she claims the pension for the first time) seems particularly beneficial. It increases the labor supply, reduces the financial cost for the social security system and generate enough extra resources to compensate for the welfare loss of those unemployed directly hit by the reform.
  • Unemployment search, job benefit, retirement
  • RePEc:cea:doctra:e2008_10
Language
  • English
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