Labor supply and government programs: A cross-country analysis

There are substantial cross-country differences in labor supply late in the life cycle (age 50+). A theory of labor supply and retirement decisions is developed to quantitatively assess the role of social security, disability insurance, and taxation for understanding differences in labor supply late in the life cycle across European countries and the United States. The findings support the view that government policies can go a long way towards accounting for the low labor supply late in the life cycle in the European countries relative to the United States, with social security rules accounting for the bulk of these effects.

► There are large cross-country differences in labor supply late in the life cycle. ► A quantitative theory of labor supply and retirement decisions is developed. ► We study the role of social security, disability insurance, and taxation. ► We focus on the US, Switzerland, the Netherlands, Spain, Italy, and France. ► Social security rules account for most of the cross-country labor supply differences.