Economic Development, Pension Policies, and the Labor Force Participation of Aged Males: A Cross-national, Longitudinal Approach

The decline in labor force participation of aged males experienced by all developed countries can be seen as the result of two kinds of change: (1) economic growth and the need for a young, recently trained labor force has affected the educational system and occupational structure in ways that give young workers a competitive advantage and force older workers out of the labor force at mandatory retirement ages, and (2) government policies have been developed to make retirement more attractive financially and to induce older workers to leave the labor force voluntarily. This paper examines the additive and interactive influence of these two groups of variables using a sample of fix time points (every five years from 1950 to 1975) for 18 relatively developed nations. Models are estimated by using generalized least squares which relate labor force participation of males aged 65 and over to such variables as the size of the agricultural labor force, the old-age dependency ratio, government revenues, social insurance and pension benefits, coverage of the population by pension systems, and the existence of means and retirement tests. The results show dominant effects from the nonpolicy variables that relate to occupational changes in industrial economies and secondary effects from policy-manipulable variables such as pension expenditures that can be changed to increase labor force participation rates and ease the strain on social security systems.