Incentives to Retire, the Employment of the Old, and the Employment of the Young in Sweden

Mårten Palme and Ingemar Svensson

in Social Security Programs and Retirement around the World

Published by University of Chicago Press

Published in print April 2010 | ISBN: 9780226309484
Published online February 2013 | e-ISBN: 9780226309507 | DOI:
Incentives to Retire, the Employment of the Old, and the Employment of the Young in Sweden

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This chapter concerns the hypothesis that the increasing generosity of the social security system has decreased labor force participation among the elderly in Sweden and investigates whether labor force participation among older workers affects employment among younger workers. The idea that unemployment among younger people in a society could be counteracted by inducing exit from the labor market of older workers has been used as an argument for providing generous social security programs. The validity of the argument that retirement of older workers increases the possibilities for younger workers of finding a job depends critically on two factors. First is the substitutability between younger and older workers in the production process. If older workers are not fully replaceable by younger ones, it will counteract any effect on the unemployment rate of younger workers. Second, the retirement of older workers will decrease production in the economy. This will, in turn, decrease the overall demand in the economy and ultimately the demand for younger workers.

Keywords: Sweden; social security; younger workers; economy; employment

Chapter.  8470 words.  Illustrated.

Subjects: Public Economics

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