The dramatic increase in life expectancy at older ages and the trend toward earlier withdrawal from the labor force are changing the age composition of the labor force in many European countries. This chapter addresses whether early exit prompted reductions in the youth unemployment rate, as is often claimed by union leaders, thus partly compensating for the welfare redistribution operated in favor of the elderly. This question necessarily relates to the labor market policies enacted during the last decades and the impact that these had on the participation rate of younger workers. The interaction of these policies and the social security legislation helps in shaping the age profile of the labor market and the trends in labor force participation. The Italian labor market is characterized by relatively high unemployment rates, particularly for the young. The two main characteristics of the youth unemployment rate in Italy are an extraordinary regional variability and a high percentage of first-job seekers among the unemployed young, particularly in the southern regions. The variables capturing the inducement to retire have a significant effect on the labor force participation of older workers. This effect has the expected sign and is very robust to different specifications, suggesting that Italian workers responded to social security incentives.
Keywords: life expectancy; youth unemployment; retirement; young workers; social security
Chapter. 13901 words. Illustrated.
Subjects: Public Economics
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