Social Security and Retirement: the Relationship between Workers, Firms and Government

In this paper we survey a number of theoretical and empirical studies
in order to propose explanations to the fall of labor force participation at
older age. Starting from the largely studied e ect of social security schemes
on labor supply, we explore the employers behavior and the role of govern-
ments in the development of early retirement schemes. We show that early
retirement is the result of a global agreement between rms and government
where workers have incentives to early exit the labor market due to generous
non actuarial bene ts. Firms have an advantage to separate older workers
because they are costly compare to young workers and governments hope
that by pushing elderly into early retirement they will solve the massive
unemployment problem.