Old Before their Time: the Role of Employers in Retirement Decisions

Do elderly workers retire early voluntarily, or are they induced to retire by their employers? We consider an exogenous shock due to a trade agreement between Switzerland and the EU—the mutual recognition agreement (MRA), which improved access to the EU market for Swiss frms. A vast literature suggests that these trade liberalization episodes lead frms to relocate and to innovate in order to increase productivity. This may lead to lower demand of skill obsolescent elderly workers and to higher demand of skilled workers. We use a diference in diferences approach on Swiss Labor Force Survey data to compare early retirement behavior in treated MRA and control (non-MRA) industries in three periods (pre-liberalization, implementation). We fnd an increase in early retirement in the MRA sector during the announcement period, which is stronger for larger frms, for exporting frms and for frms with a large age wage gap. We also fnd an increase in the share of graduates in all age groups. Wages are largely unaffected.