Adrian Lerche, Institute for Employment Research (IAB), Nuremberg

Lump of Labor? Employment Effects of Pension Reforms in Firms and Labor Markets

Abstract

We study how pension reforms affect overall employment in firms and local labor markets. We leverage rich administrative data on all German workers and firms along with cohort-based pension reforms generating quasi-experimental variation in the employment of older workers. At the firm level, we find significant negative spillovers: as old workers stay in their jobs longer, employment of younger workers declines. However, these effects reverse at the local labor market level, where we find positive spillovers on young workers' employment and strongly positive overall employment effects of pension reforms. These market-level effects are accompanied by additional margins of economic expansion, including firm entry and higher investment by incumbent firms. Our findings highlight the importance of accounting for equilibrium adjustments when evaluating the labor market impacts of workforce aging and retirement policy.

Dr Adrian Lerche is a senior researcher at the Institute for Employment Research (IAB) in Nuremberg and is affiliated as Research Fellow with the Institute of Labor Economics (IZA) and as Research Associate with the Rockwool Foundation Berlin.

He received his PhD in Economics from Universitat Pompeu Fabra in Barcelona and was a post-doctoral researcher and Acting Professor at LMU Munich. His research covers topics such as wage inequality, old-age employment, fiscal support programs for firms, and the school-to-work transition.

You can read more about Adrian Lerche here

CEBI contact: Jakob Egholt Søgaard