Workers' Employment Rates and Pension Reforms in France: The Role of Implicit Labor Taxation

Over the last fifteen years, France has experienced a reversal of older workers’ labor force participation and employment rates. Changes in health, life expectancy or education levels over the period are trend variables and thus cannot explain this “U-shaped” time profile. Pension reforms and associated changes in monetary incentives to retire are a more plausible explanation. Their impact is measured by the implicit tax rate on working longer, which combines induced changes in the level of benefits and the fact of foregoing one year of these benefits. We also account for changes in the relative importance of alternative pathways to normal retirement. Pension reforms and access to these alternative pathways have moved in ways that can account for a significant part of the “U-shaped” pattern of older workers labor force participation.