The losses generated by early retirements in Brazil

Abstract

This study seeks to investigate the extent to which the early retirements reduce the aggregate income of the Brazilian economy through two specific channels. The first one is the reduction of aggregate income caused by a drop in employment. The second one is the reduction of the aggregate income as a result of a drop, for those who are still employed, in both hourly wage and hours worked. By using an instrumental variable method, we estimate the effects of early retirements on the probability of occupation and on the hourly wage and hours worked. We observe that early retirements have a negative impact on these three variables and, therefore, decreases aggregate income.