Social security and early 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 effect of social security schemes on labor supply, we explore the employers behavior and the role of governments in the development of early retirement schemes. We show that early
retirement is the result of a global agreement between firms 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.