Essays in labour economics

Abstract

The elderly are an ever-growing group of the population of western countries. Increasing their low employment rates is one of the greatest challenges we face in labour market policy today and is the subject of the first chapter of this thesis. I evaluate the labour market effects of partial retirement that is a scheme that subsidises part-time work for older workers. It was introduced as an attempt to extend working lives by incentivising part-time employment after a certain age. I find that this policy had overwhelmingly negative effects on old-age labour supply as most workers substituted full-time work with part-time work in partial retirement without actually extending their active lives. Chapter 2 of this thesis is a reflection on the labour market situation of young workers with parental backgrounds that make it difficult for them to achieve their potential. When and where they are held back and whether an open labour market can compensate for this disadvantage is the subject of this chapter. I find that after entering the labour force, workers from disadvantaged backgrounds ”catch-up” in terms of wages with respect to their privileged peers with the same educational achievement. I explain this phenomenon in a setup of education signalling with noise and subsequent employer learning. In the third chapter my co-authors and I focus on the consequences of national wage setting mechanisms in countries with large geographic differences in labour productivity. We confront Germany with relatively flexible wage bargaining mechanisms and Italy with very rigid ones. We find that given the large productivity differences in both countries, Italy’s highly centralised bargaining system generates significant inefficiencies and high costs in terms of aggregate earnings and employment particularly in the South.