Ronald Wolthoff

Early Retirement Behaviour in the Netherlands: Evidence From a Policy Reform

In the early 1990s, the Dutch social partners agreed upon transforming the generous and actuarially unfair PAYG early retirement schemes into less generous and actuarially fair capital funded schemes. The starting dates of the transitional arrangements varied by industry sector. In this study, we exploit the variation in starting dates to estimate the causal impact of the policy reform on early retirement behaviour. We use a large administrative dataset, the Dutch Income Panel 1989-2000, to estimate hazard rate models for early retirement. We conclude that the policy reform induced workers to postpone early retirement. In particular, both the price effect (reducing implicit taxes) and the wealth effect (reducing early retirement wealth) are shown to have a positive impact on the early retirement age. Yet, we show that model specifications including the most commonly used financial incentive measures are open to further improvements, given that these are outperformed by a simple specification with dummy variables.

Competing with asking prices

In many markets, sellers advertise their good with an asking price. This is a price at which the seller will take his good off the market and trade immediately, though it is understood that a buyer can submit an offer below the asking price and that this offer may be accepted if the seller receives no better offers. Despite their prevalence in a variety of real world markets, asking prices have received little attention in the academic literature. We construct an environment with a few simple, realistic ingredients and demonstrate that using an asking price is optimal: it is the pricing mechanism that maximizes sellers’ revenues and it implements the efficient outcome in equilibrium. We provide a complete characterization of this equilibrium and use it to explore the positive implications of this pricing mechanism for transaction prices and allocations.

Applications and Interviews: A Structural Analysis of Two-Sided Simultaneous Search

A large part of the literature on frictional matching in the labor market assumes bilateral meetings between workers and firms. This ignores the frictions that arise when workers and firms meet in a multilateral way and cannot coordinate their application and hiring decisions. I analyze the magnitude of these frictions. For this purpose, I present an equilibrium search model of the labor market with an endogenous number of contacts between workers and firms. Workers contact firms by applying to vacancies, whereas firms contact applicants by interviewing them. Sending more applications and interviewing more applicants are both costly activities but increase the probability to match. In equilibrium, contract dispersion arises endogenously and workers spread their applications over the different types of contracts. Estimation of the model on the Employment Opportunities Pilot Projects data set provides values for the fundamental parameters of the model, including the cost of an application, the cost of an interview, and the value of non-market time. These estimates are used to determine the loss in social surplus compared to a Walrasian world. Frictions on the worker and the firm side each cause approximately half of the 4.7% loss. There is a potential role for activating labor market policies, because I show that for the estimated parameter values welfare is improved if unemployed workers increase their search intensity.

Becker Meets Ricardo: Multisector Matching with Social and Cognitive Skills

This paper presents a tractable framework for studying frictionless matching in school, work, and marriage when individuals have heterogeneous social and cognitive skills. In the model, there are gains to specialization and team production, but specialization requires communication and coordination between team members, and individuals with more social skills communicate and coordinate at lower resource cost. The theory delivers full task specialization in the labor and education markets, but incomplete specialization in marriage. It also captures well-known matching patterns in each of these sectors, including the commonly observed many-to-one matches in firms and schools. Equilibrium is equivalent to the solution of an utilitarian social planner solving a linear programming problem.

Search Frictions, Competing Mechanisms and Optimal Market Segmentation

In a market in which sellers compete for heterogeneous buyers by posting mechanisms, we analyze how the properties of the meeting technology affect the allocation of buyers to sellers. We show that a separate submarket for each type of buyer is the efficient outcome if and only if meetings are bilateral. In contrast, a single market with all agents is optimal if and only if the meeting technology satisfies a novel condition, which we call “joint concavity.” Both outcomes can be decentralized by sellers posting auctions combined with a fee that is paid by (or to) all buyers with whom the seller meets. Finally, we compare joint concavity to two other properties of meeting technologies, invariance and non-rivalry, and explain the differences.

Academic wages and pyramid schemes: a mathematical model ∗

Abstract This paper analyzes a steady state matching model interrelating the education and labor sectors. In this model, a heterogeneous population of students match with teachers to enhance their cognitive skills. As adults, they then choose to become workers, managers, or teachers, who match in the labor or educational market to earn wages by producing output. We study the competitive equilibrium which results from the steady state requirement that the educational process replicate the same endogenous distribution of cognitive skills among adults in each generation (assuming the same distribution of student skills). We show such an equilibrium can be found by solving an infinite-dimensional linear program and its dual. We analyze the structure of our solutions, and give sufficient conditions for them to be unique. Whether or not the educational matching is positive assortative turns out to depend on convexity of the equilibrium wages as a function of ability, suitably parameterized; we identity conditions which imply this convexity. Moreover, due to the recursive nature of the education market, it is a priori conceivable that a pyramid scheme leads to greater and greater discrepancies in the wages of the most talented teachers at the top of the market. Assuming each teacher teaches N students, and contributes a fraction θ ∈ ] 0 , 1 [ to their cognitive skill, we show a phase transition occurs at N θ = 1 , which determines whether or not the wage gradients of these teachers remain bounded as market size grows, and make a quantitative prediction for their asymptotic behavior in both regimes: N θ ≥ 1 and N θ 1 .