Date Added: Jan 2010
How is it that populations react so differently to policy incentives among developed countries? The authors noticed that senior employment rates not only differ in level strikingly from one country to another, they also differ in their reaction to retirement incentives set by governments. They show the importance of trust given to the employer in wage negotiations by a simple trade-off model. According to this model, reaction of the senior activity rate to policy changes depends on the properties of the distribution of trust to employers at the country level.