Permanent wage cost subsidies for older workers. An effective tool for employment retention and postponing early retirement?

• Published in: Labour economics Vol. 58; pp. 145 - 166
• Main Authors: Albanese, Andrea, Cockx, Bart
• Format: Journal Article
• Language: English
• Published: Elsevier B.V 01-06-2019
• Subjects: Endogenous sampling; Older workers; Wage cost subsidies; Weighted difference-in-differences; J18; Wage cost subsidies; C21; Weighted difference-in-differences; Endogenous sampling; J3; J14; Older workers
• ISSN: 0927-5371; 1879-1034
• DOI: 10.1016/j.labeco.2018.01.005

•The empirical literature on wage cost subsidy targeted at older workers is scarce.•We rely on administrative data with the employment history of individuals since 1957.•We integrate the inverse probability weighting in a nonlinear difference-in-differences estimator.•Small employment effects and no impact on wages are found.•The employment retention of employees at high risk of retiring early is enhanced.
This paper examines the effects of a permanent wage cost subsidy in Belgium on employment retention, working time and hourly wage of older men. To estimate these effects we propose a semi-parametric weighted difference-in-differences estimator that accounts for endogenous stratification in the sampling from a population of men born between 1941 and 1950. We find small positive short-run impacts on working time and larger ones on the retention rate in employment, but only for employees at high risk of early retirement. The wage is not affected.