joint with Piera Bello (USI)

This paper analyzes how trade agreements that modify the market opportunity for firms may affect the transition to early retirement among old employees in Switzerland. We argue that early retirement may not be a worker’s decision, but may be induced (or even forced) by firms’ behavior. To explore this avenue, we exploit the negotiation, announcement and implementation in the 1999-2002 period of the Bilateral Agreements I, a package of treaties liberalizing trade between the EU and Switzerland for some specific manufacturing industries, as a source of exogenous variation. In particular, we identify three groups of industries: a treatment group constituted of manufacturing industries affected by the trade policy reform, a control group of unaffected manufacturing industries and a control group of unaffected service industries. Using Swiss Labor Force Survey data, we implement a Difference in differences estimator, in which we compare early retirement behavior and wages among groups in a pre-treatment (1992-1998) period, in an announcement period (1999-2001) and in an after-treatment or implementation (2002-2005) period. Our empirical results show that the probability of early labor market exit of older workers increases in the affected manufacturing industries during the announcement period, but has no effect in the after-treatment period. On the contrary, wages increase in the affected manufacturing industries in the after-treatment period. This evidence is consistent with an early restructuring effort by firms operating in industries affected by Bilateral Agreement, in order to increase their degree of competitiveness.

VIEW PAPER