Research: Effect of Early Retirement and Part-time Employment on Participation Rates of Older Workers in Europe

The results of a study analyzing the variation in labor market withdrawal of older workers across 13 European countries over the period 1995-2008 has been published. In "Early retirement across Europe. Does non-standard employment increase participation of older workers?," Jim Been and Olaf Van Vliet sought "to contribute to existing macro-econometric studies by taking non-standard employment into account, by relating the empirical model more explicitly to optional value model theory on retirement decisions and by using a two-step IV-GMM estimator to deal with endogeneity issues."

Their analysis, published as Netspar Discussion Paper No. 10-2014-044 led Been and Van Vliet to the conclusion that part-time employment is negatively related to labor market withdrawal of older men. This relationship is less strong among women. In addition, they found that part-time employment at older ages does not decrease the average actual hours worked. Furthermore, the results show a positive relationship between unemployment among older workers and early retirement similar to previous studies.

As a wider implication, our results suggest that facilitating part-time work might contribute to higher labor market participation among older workers at the extensive margin. However, facilitating part-time employment could also induce a reduction in working hours among persons who would otherwise have remained working in full-time employment. Our analysis suggests that increases in part-time employment did not have negative effects on the labor supply at the intensive margin across countries. For men, the results even suggest clear positive effects. This indicates that part-time work schemes may actually increase the labor supply at both the extensive and the intensive margin at older ages.

Source: Social Science Research Network Abstract (October 15, 2014)