The Impact of Early Retirement Incentives on Labor Market Participation: Evidence from a Parametric Change in the Czech Republic

The authors investigate the impact of a change in the Czech early retirement scheme on the labor force participation of older male workers. Using the difference-in-differences method they find that a reduction in early retirement benefits by 2–3% leads to significant decrease in the probability of being inactive for eligible individuals. The effect for individuals who are on the margin of eligibility for early retirement is much stronger than that for an average eligible individual. The authors´ finding implies high elasticity of older male workers’ participation rate. The public policy implication is that a reduction in early retirement benefits can serve as a very effective tool to increase the participation of older men in the Czech labor market.