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The decision about the timing of retirement and actual retirement age is based on financial factors as well as personal characteristics and country-level macro indicators. The goal of this research is to examine the associations between the mentioned factors and actual retirement age while focusing on similarities and differences between European countries. The data came from 34,478 respondents in 20 countries who participated in waves 2, 4 and 5 of the Survey of Health, Ageing and Retirement in Europe (SHARE). Using Ordinary least squares regression models, we explored associations between actual retirement age and personal as well as the country-level variables. Results reveal that higher Gross Domestic Product (GDP), higher pension spending, being a male, and being self-employed were found to be associated with higher actual retirement age, while being a female, civil servant, having fair or poor health, and secondary education were found to be associated with lower actual retirement age. The effect of net household wealth and GDP were not consistent across countries. The contribution of our study is the ability to make predictions about actual retirement age based on each country’ GDP per capita, thus adding the country variables to the individual characteristics and improving our understanding concerning actual retirement age. The different effects of wealth and GDP across countries suggest that policymakers should take into account the specific effect in their country to better assess the implications of different policy measures on the actual retirement age.

PurposeThe current study investigates the association of employment at older age (60–80 years ) with the cognitive component of subjective well-being (SWB): life satisfaction.Design/methodology/approachOut of the Survey of Health, Ageing and Retirement in Europe (SHARE), the present study’s sample included 58,197 observations of participants aged 60–80 years from 18 countries. The authors estimate the direct effects of employment and number of working hours on life satisfaction while considering the characteristics of the job and their impact.FindingsResults reveal that individuals who do not work enjoy a higher level of life satisfaction and so do those who work in developing jobs. Work under pressure reduces the level of SWB and working in physically demanding jobs has no significant impact on SWB. The results confirm previous findings regarding the positive contribution of self-employment to individuals’ SWB.Originality/valueThe results allow policy makers to implement policy measures that can improve older workers' SWB.

Our purpose is to examine the level of reservation wages among older unemployed (45+), and investigate what happens to the level of reservation wages as the length of unemployment increases. Using data from questionnaires completed by unemployed, we examined the reservation wages of 364 individuals and asked whether they would be willing to compromise in terms of their occupation, profession or geographic location to find a job. 112 of the participants responded to two questionnaires over a three-month period to determine the changes in their expectations over time. Additionally, we conducted qualitative interviews with 10 unemployed. We found that older people experienced longer periods of unemployment, and had a greater willingness to reduce salary expectations. The study establishes an innovative connection between older unemployed, reservation wages and the duration of unemployment, showing that higher reservation wages among older unemployed is the cause of prolonging their unemployment.

The employed and unemployed who are considering giving up work or seeking employment, respectively, have to consider the pecuniary and non-pecuniary benefits of both positions. What is the minimal allowance that motivates an individual to move from employment to unemployment? What is the minimal salary that motivates an unemployed individual to seek employment? This study examines those questions, specifically with regard to the differences between older and younger individuals. Our findings demonstrate that age has a strong impact on the threshold incomes and behavioral factors. Older people demand more money than younger people for giving up their jobs. Older workers also have a stronger status-quo bias and demonstrate a greater preference for work. However, there is no significant difference between young and old with respect to the income needed to motivate a switch from unemployment to employment.

In this research we show that workers aged 30–44 were significantly more likely than those aged 45–59 to find a job a year after being unemployed. The main contribution is demonstrating empirically that since older workers’ difficulties are related to their age, while for younger individuals the difficulties are more related to the business cycle, policy makers must devise different programs to address unemployment among young and older individuals. The solution to youth unemployment is the creation of more jobs, and combining differential minimum wage levels and earned income tax credits might improve the rate of employment for older individuals.

Using an experiment conducted with 384 young Israelis, the authors find that if young people are actually working as unskilled workers, the status quo bias increases the premium that they require for giving up their jobs and seeking more education. This excess premium may make some individuals choose to remain employed as unskilled workers rather than pursue higher education. Such a decision may trap them in a life of poverty. The authors maintain that their results prompt a reexamination of the widely held belief that early employment is an advantage for young people.

The goal of this article is to investigate the impact of back loading on the hiring of older workers. We argue that the impact of back loading on the motivation of a worker to put effort into work depends, among other variables, on the probability of being able to find another job. The less likely it is that one can find another job the more likely one is to exert a greater effort at work. Given that older workers are less likely to be able to find another job if they are dismissed from their current position, they are also less likely to shirk their obligations at work. Therefore, firms have to expend fewer resources monitoring their work. In addition, we demonstrate that the probability of employee misconduct declines with the number of years on the job even when the probability of detection remains constant.

Purpose – The purpose of this article is to examine the existence of biased stereotypes about older workers. What are the economic implications of such biased stereotypes? Finally, what policy measures are required in order to achieve efficiency in the labor market? Design/methodology/approach – The authors grouped 25 opinions about older workers into three categories of stereotypes. The first category dealt with the productivity of older staff. The other two categories addressed their reliability and adaptability. The authors then questioned 312 Israeli respondents about the degree to which they agreed or disagreed with the opinions. Finally, the authors examined theoretically the economic effects of biased stereotypes about older workers. Findings – The study demonstrates that individual and organizational characteristics affect employers' attitudes. Age was a significant factor in all three categories. The older the respondent, the fewer prejudices he or she had against older workers. Other characteristics such as gender, interaction with older workers, the nature of the respondent's work in the organization, the age of the employees, and the size of the organization were all significant, but not always, and not in all three categories. The findings imply that there are biased stereotypes about older workers, so the allocation of workers is distorted, which leads to a failure of the market. Originality/value – The results strengthen the economic justification for policy intervention to correct the distorted level of employment of older workers in the labor market.

Countries attempt to attract foreign investors by offering them a set of incentives. The most common types of foreign direct investment incentives are grants and tax relief. Although the amount of the grant is independent of future situations, the value of a tax relief depends on future profits. Our study used the behavioral approach to test experimentally the preferences of managers regarding the desired types of incentives under various conditions. We found, ‘Regret Effect’, ‘Statues Quo Bias’, and ‘Insurance Effect’ in subjects’ decision making. A country can improve the incentives it offers by considering the various behavioral biases of the companies’ managers. Copyright # 2008 John Wiley & Sons, Ltd.

We analyze innovative activity in a general framework with time-dependent rewards and sunk costs. When firms are identical, innovation is delayed by an increase in the number of firms or a decrease in the size of the reward. When one firm has higher profit potential, it is more likely to innovate first. Our framework generalizes an all-pay auction; however, we show that under certain conditions there is qualitatively different equilibrium behavior.

We study all–pay auctions with variable rewards under incomplete information. In standard models, a reward depends on a bidder’s privately known type; however, in our model it is also a function of his bid. We show that in such models there is a potential for paradoxical behavior where a reduction in the rewards or an increase in costs may increase the expected sum of bids or alternatively the expected highest bid.

In this paper, the effects of demographic changes, particularly in the age structure of population, on government social expenditure is estimated. The results indicate that income elasticity of government social services is unitary in high income countries and above that level in low income countries, especially in education and welfare. The paper attempts also to forecast the pressure of these government outlays in four distinct countries characterized by different demographic parameters.

Estimates the effect of a minimum wage on the level of employment and on wages in Israeli industry. The findings surprisingly suggest that both labour demand and supply decrease after the institution of a minimum wage. Thus, employment is reduced while wages remain practically unchanged.

This paper considers an economy where a public good is provided via advertising. The consumers' preferences are represented using the ‘characteristics’ approach', and the advertising has a potentially enhancing effect on the characteristics' content of a given commodity. We define competitive equilibria and show they exist. The welfare properties of the resulting allocations are analyzed, and conditions for over- and under-production of the public good are provided.

This paper evaluates the consequences of minimum wage (MW) and earned income tax credit (EITC) in a model with heterogeneous costs of investment in human capital. Our model studies the effects of a MW and an EITC on employment, productivity, and total output for two types of groups: those with a low cost of acquiring human capital and a long horizon of earnings (Type Ys); and those with a high cost of acquiring human capital and a short horizon of earnings (Type Os). We assume that Type Ys consider investing in human capital while Type Os have a certain predetermined level of human capital and do not consider changing it. Our model suggests that a government might consider imposing a MW exclusively for Type Y individuals and an EITC exclusively for Type O individuals. Some of the best effects of each policy would therefore be obtained and some of the worst consequences would be avoided.

A multinational corporation’s (MNC) entry into a host country brings benefits to the economy of that country, some direct (such as increasing production and employment) and some indirect (such as productivity spin-off). Governments that view MNCs as engines for growth and regional development have begun to encourage the flow of foreign investment into their country in hopes of increased local employment, market production and export capacity. MNCs consider first the maximization of profit when selecting a site to establish their subsidiaries. An MNC examines possible investment sites and indicates those that are best fitted for the investment. The countries that remain at this stage are similar in terms of their economic characteristics, and they compete with each other for receiving the foreign investment. In this paper we use tools from auction theory to analyze the competition between host countries and MNCs and investigate the existence of Nash equilibrium strategies. The characteristics of this equilibrium are considered and assessed. We developed a general model for examining the incentive competition between two countries and then apply it for several subgroups according to the number of MNCs and the availability of information. It turns out that the characteristics of the equilibrium depend on the number of MNCs as well as on the structure of their contribution to the host country economy., peer-reviewed

We study all-pay auctions with variable rewards under incomplete information. In standard models, a reward depends on a bidder's privately known type; however, in our model it is also a function of his bid. We show that in such models there is a potential for paradoxical behavior where a reduction in the rewards or an increase in costs may increase the expected sum of bids or alternatively the expected highest bid.

The paper deals with a model of duopoly pricing in the context of firms providing services to consumers. Each of the firms has a waiting line of customers arriving randomly. The service provided by both firms is identical and the service time of both firms is assumed to obey the same distribution. Different consumers have different time costs and have to decide whether or not to join one of the lines. It is shown that the Cournot-Nash equilibrium is such that the two firms charge in general different prices. One of the firms specializes in servicing individuals with high cost of time (and the other the rest). Moreover, some examples of non-existence of Cournot-Nash equilibrium and permanent oscillations of prices are shown.

The purpose of this paper is to analyze the effects of investment on productivity rates. The objective is to use these insights in order to estimate possible outcomes of various growth paths on future productivity trands. The analysis is based on the assumption that new investestments reflect, among other things, the adoption of new technologies which are embodied in new equipment. The results indicate that in the long run a positive effect of investments on productivity prevails. However, in the short run, the industry goes through an adjustment process where productivity rates may decline.

The purpose of this paper is to analyze the effects of investment on productivity rates. The objective is to use these insights in order to estimate possible outcomes of various growth paths on future productivity trands. The analysis is based on the assumption that new investestments reflect, among other things, the adoption of new technologies which are embodied in new equipment. The results indicate that in the long run a positive effect of investments on productivity prevails. However, in the short run, the industry goes through an adjustment process where productivity rates may decline.

I. Introduction, 117. — II. The simple model (continuous time), 117. — III. The discrete production model and the Golden Rule, 119. — IV. Discounting and the optimal stocks of capital, 121.

This paper deals with the relationship between the monopoly price and the socially optimal price in the presence of consumption diseconomies. The above relationship is derived from characteristics of the utility function. THE THEORY of external diseconomies asserts that the socially optimal price of a good causing a diseconomy should be above its marginal cost. We also know that a monopolist will charge a price above its marginal cost. The purpose of this paper is to determine the relationship between these two prices. In addition, we demonstrate that knowledge of consumer preferences permits one to infer whether the monopoly price would be higher or lower than the socially optimal price. This relationship is of both theoretical and applied interest. Baumol and Oates [1] suggested some practical ways to measure the marginal harm to the environment in the presence of external diseconomies, using certain environmental standards. In general, the determination of the socially optimal price is impossible because the elements determining the price are unobserved. We will prove a theorem based on elasticity characteristics of the utility function, which yields policy information necessary to achieve a social optimum. We shall also prove that a large class of utility functions will yield the same optimal prices; in particular, the socially optimal price is equal to the monopoly price. In the past, it has been commonly asserted that the monopolistic price would be higher than the socially optimal price in the presence of consumption diseconomies. This view is illustrated by Naor [8], and in a more general case by Knudsen [7]. They do not deal with a general model of external diseconomies, but rather with a specific case of a queuing model with a waiting line. Within this context, including some restrictions on the utility function, they derive the above relationship between the monopolistic and the socially optimal prices. Buchanan [2] also discusses the possibility of having a socially optimal price higher than the monopolistic price. Examples of such possibilities in the context of diseconomies arising from congestion are supplied by Edelson [6].2 Similar problems were discussed by Diamond and Mirrlees [5] in dealing with the relationship between the Pareto optimal situation and the competitive equilibrium. In addition, a general discussion of optimal surcharge in cases of consumption externalities is given in Diamond [4]. ' Research for this paper was done while I. Luski was Visiting Assistant Professor of Economics, University of Florida. We are indebted to Milton Z. Kafoglis and David Levhari for helpful comments and suggestions. 2 It can be shown that the results of his examples can be inferred from our theorem.

This paper will deal with the following question: what happens in a service system where the service is supplied by two competitive firms? By a service system we mean any system where customers have to wait in lines before they are served. As we will show, we cannot apply the usual results of economic theory to service systems. For example, in ordinary economic theory two firms supplying the same good will always sell it at the same price. This result is not always true for the case of service and waiting lines. We will discuss the conditions under which two service firms selling at the same price are not in equilibrium. A discussion of queuing systems with single server (that is, a monopoly) are found in the works of Edelson [1], Naor [3], Knudsen [2] and others. However, there is no mention in the literature of a general equilibrium in a queuing system with more than one server. Between these two extreme cases, the general equilibrium and the determinate single-firm model, lie the partial equilibrium cases, and this paper deals with one of these.