ABSTRACT
This chapter discusses the employer incentives and shows whether a firm's liabilities have any effect on its behaviour. It considers whether the joint incentives of the worker and the firm have more influence on lay-offs when times are hard. The chapter deals with a description of the relevant rules for social security for older people in Finland, including the main features of social security and its possible effect on labour market behaviour. It explores some theoretical considerations on employer and employee behaviour; the full model behind these considerations can be found in T. Hakola and R. Uusitalo. If unemployment is an important form of early exit, it is difficult to claim that a firm's role is insignificant in early retirements. Economic research on early retirement from the work force has generally concentrated on employee behaviour. A disability pension is the most common form of early retirement.
