Retirement of Older Workers and Employment of the Young
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Policy makers have often argued that an additional benefit of facilitating early retirement is that it creates employment for the young. This may happen if older and younger workers are substitutes. Nowadays policies are aimed at increasing employment of older people to counter the economic consequences of an aging population. Opponents of such policies argue that these will adversely affect youth employment. This paper revisits the nexus between employment of older and younger workers, if only to put any concerns for adverse effects of later retirement on youth employment to rest. To empirically investigate this issue we estimate a dynamic model of employment of the young, prime age and old people using panel data of 22 OECD countries over the time period 1960–2008. Our empirical analysis does not support the hypothesis that employment of the young and old are substitutes and finds some minor complementarities. This suggests that encouraging later retirement will have no adverse effect on youth employment.
Key wordsyouth employment retirement panel data
We wish to thank seminar participants at the Utrecht School of Economics and the International Social Security program meetings of the National Bureau of Economic Research in Barcelona, Spain, 18–21 May 2006, and in Taormina, Italy, 24–26 May 2007, and two anonymous referees for valuable comments and Lisa Klautzer for research assistance. For financial support we wish to thank the National Bureau of Economic Research (Cambridge, USA), NETSPAR and Stichting Instituut GAK.
This article is distributed under the terms of the Creative Commons Attribution Noncommercial License which permits any noncommercial use, distribution, and reproduction in any medium, provided the original author(s) and source are credited.
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