Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/145195
Authors: 
Lalé, Etienne
Year of Publication: 
2016
Series/Report no.: 
IZA Discussion Papers 10061
Abstract: 
This paper provides a unified account of the trends in unemployment and labor force participation pertaining to the employment experience of older male workers during the past half-century. We build an equilibrium life-cycle model with labor-market frictions and an operative labor supply margin, wherein economic turbulence à la Ljungqvist and Sargent (1998) interact with institutions in ways that deteriorate employment. The model explains simultaneously: (i) the fall in labor force participation in the United States, (ii) the similar but more pronounced decline in Europe alongside rising unemployment rates and (iii) differences across European countries in the role played respectively by unemployment and labor force participation. The model also shows that policies that fostered early retirement may have exacerbated the deterioration of European labor markets: raising early retirement incentives to reduce unemployment among older workers tends to increase unemployment at younger ages, especially in turbulent economic times and under stringent employment protection legislation.
Subjects: 
job search
job loss
turbulence
European unemployment
labor force participation
JEL: 
E24
J21
J64
Document Type: 
Working Paper

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