nep-age New Economics Papers
on Economics of Ageing
Issue of 2007‒09‒09
three papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Labor Market Rigidities and the Employment Behavior of Older Workers By David M. Blau; Tetyana Shvydko
  2. Strategic Competition in Swedish Local Spending on Childcare, Schooling and Care for the Elderly By Edmark, Karin
  3. A Tax on Work for the Elderly: Medicare as a Secondary Payer By Gopi Shah Goda; John B. Shoven; Sita Nataraj Slavov

  1. By: David M. Blau (Ohio State University and IZA); Tetyana Shvydko (University of North Carolina at Chapel Hill)
    Abstract: The labor market is often asserted to be characterized by rigidities that make it difficult for older workers to carry out their desired trajectory from work to retirement. An important source of rigidity is restrictions on hours of work imposed by firms that use team production or face high fixed costs of employment. Such rigidities are difficult to measure directly. We develop a model of the labor market in which technological rigidity affects the age structure of a firm’s work force in equilibrium. Firms using relatively flexible technology care only about total hours of labor input, but not hours of work per worker. Older workers with a desire for short or flexible hours of work are attracted to such firms. Firms using a more rigid technology involving team production impose a minimum hours constraint, and as a result tend to have a younger age structure. A testable hypothesis of the model is that the hazard of separation of older workers is lower in firms with an older age structure. We use matched worker-firm data to test this hypothesis, and find support for it. Specification tests and alternative proxies for labor market rigidity support our interpretation of the effect of firm age structure on the separation propensity. These results provide indirect but suggestive evidence of the importance of labor market rigidities.
    Keywords: labor demand, retirement, labor market institutions
    JEL: J26 J23
    Date: 2007–08
  2. By: Edmark, Karin (Department of Economics)
    Abstract: This study tests for strategic competition in public spending on childcare and primary education, and care for the elderly, using panel data on Swedish municipalities over 1996-2005. The high degree of decentralization in the organization of the public sector implies that Swedish data is highly suitable for this type of study. The study is not limited to interactions in the same type of expenditure, but also allows for e¤ects across expenditures. The results give no robust support for the hypothesis that municipalities react on the spending policy of neighbouring municipalities in the decision on own spending on care of the elderly, childcare and education.
    Keywords: Strategic interactions; Spatial econometrics; Decentralization; Local Public Spending
    JEL: C31 H72 H77
    Date: 2007–09–03
  3. By: Gopi Shah Goda; John B. Shoven; Sita Nataraj Slavov
    Abstract: Medicare as a Secondary Payer (MSP) legislation requires employer-sponsored health insurance to be a primary payer for Medicare-eligible workers at firms with 20 or more employees. While the legislation was developed to better target Medicare services to individuals without access to employer-sponsored insurance, MSP creates a significant implicit tax on working beyond age 65. This implicit tax is approximately 15-20 percent at age 65 and increases to 45-70 percent by age 80. Eliminating this implicit tax by making Medicare a primary payer for all Medicare-eligible individuals could significantly increase lifetime labor supply due to the high labor supply elasticities of older workers. The extra income tax receipts from such a policy would likely offset a large percentage of the estimated costs of making Medicare a primary payer.
    JEL: H51 J14 J21 J26
    Date: 2007–09

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