Employment Effects of Incentivized Gradual Retirement Plans

Abstract We investigate the effect of Incentivized Gradual Retirement plans (GRPs) on employment. GRPs encourage later retirement of older workers by offering a reduction in working hours with only a limited decrease in net earnings and pension accrual. A second policy aim is that municipalities use this freed up capacity to hire more young employees. We exploit variation in the availability of GRPs between Dutch municipalities to identify its employment effects. We find that GRPs increase labor supply for older civil servants by almost 7 full-time weeks on a yearly basis. We do not find an increase in the hiring of young workers.