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Labour Economics 000 (2018) 1–18

Contents lists available at ScienceDirect

Labour Economics
journal homepage: www.elsevier.com/locate/labeco

Culture, financial constraints, and retirement decision☆

Lionel Cottier a,b,∗
a
University of Lausanne, Department of Economics, Lausanne 1015, Switzerland
b
NCCR LIVES, Switzerland

a r t i c l e i n f o a b s t r a c t

JEL classification: This paper investigates the interaction between cultural effects and financial constraints. I study how culture
J14 affects male labor supply near retirement before and after reforms that introduced early access to pension bene-
J22 fits. Variation in the cultural dimension arises from different cultural groups across state borders in Switzerland.
J26
Results show that the impact of culture over time follows changes in financial constraints resulting from the
Z10
reforms. While individuals from the two cultural groups had identical labor force participation rates near retire-
Keywords: ment in 1970, they differ by almost three percent in 2000. I argue that the introduction of early access to pension
Culture benefits in the 1980s and 1990s loosened financial constraints and gave more room for culture to affect labor
Labor supply force participation.
Financial constraints
Work attitudes
Retirement
Social norms

1. Introduction
Labor force participation (LFP) is highly heterogeneous across devel-
oped countries. At the high end of the spectrum, Sweden, Switzerland,
and Iceland enjoy participation rates well above 80% for individuals be-
tween 25 and 64 years old. At the low end, countries like Italy, Ireland,
and Belgium are below 70%. In addition to cross-country heterogeneity,
differences in LFP also vary across age groups. The difference between
high and low participation countries is only 20 percentage points for in-
dividuals between 25 and 34. However, it reaches more than 40 percent-
age points for individuals aged 55 to 64 (OECD, 2016). Understanding
the driving forces behind LFP differences is therefore a challenge.
Economists have traditionally tried to explain these differences by
studying economic incentives and constraints. Prescott (2004) claims
that taxes account for a large share of the differences in labor supply
over time and across G-7 countries, while Alesina et al. (2006) argue that
Americans work more than Europeans because of labor market regula-
tions and union policies. Recently a growing body of literature consid-
ers the effects of culture on economic outcomes (e.g. Algan and Cahuc,
2005; Benhabib et al., 2010; Eugster et al., 2017; Fernández et al., 2004;
☆
I thank two anonymous referees and the Guest Editor Kristiina Huttunen for detailed comments. I am grateful to Stefan Bauernschuster, Giuliano Bonoli, Guido
Buenstorf, Stefano DellaVigna, Marc Gurgand, Matthew O. Jackson, Hilary Hoynes, Daria Kalyaeva, Rafael Lalive, Etienne Lehmann, Simone Moriconi, Emmanuel
Saez, Andreas Steinhauer, Josef Zweimüller; seminar audiences in Lausanne and Stanford; and conference participants at ESS 2016, SOLE 2017, and EALE 2017 for
thoughtful comments.
∗
Corresponding author.
E-mail address: lionel.cottier@gmail.com
Moriconi and Peri, 2015).1 However the interaction between culture
and other economic factors remains largely unexplored (Alesina and
Giuliano, 2015). We can wonder whether culture always matters, and
whether changes in the economic environment alter its effects.
This paper studies how culture affects male labor force participation
near retirement before and after reforms that introduced early access
to pension benefits. Switzerland’s linguistic divide provides variation in
the cultural dimension. Four national languages split the country into
language regions that do not follow institutional or geographical bor-
ders.2 Two main language regions emerge: the Romance speaking one
covers the South and the West of the country, containing individuals
speaking French, Italian, and Romansh; and the German speaking one,
which covers the North and the East. Importantly, the language mix does
1
Like most recent empirical papers on the subject, I follow the definition of
Guiso et al. (2006), who define culture as “Customary beliefs, values, and social
constraints that ethnic, religious, and social groups transmit fairly unchanged
from generation to generation”.
2
As pointed out by Alesina and Giuliano (2015), there is no clear cut defini-
tion of institutions in the literature, as it may refers to both formal institutions
(legal systems, regulations) and informal ones (social factors, beliefs, norms). In
what follows, I use the term institutions to refer to formal institutions only, and
consider the informal ones as part of culture.

https://doi.org/10.1016/j.labeco.2018.04.008
Received 30 October 2017; Received in revised form 16 March 2018; Accepted 16 April 2018
Available online xxx
0927-5371/© 2018 Elsevier B.V. All rights reserved.

Please cite this article as: L. Cottier, Labour Economics (2018), https://doi.org/10.1016/j.labeco.2018.04.008
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not vary smoothly across the territory but changes sharply at borders. A
key difference that I exploit in this study is that Romance speakers dis-
play higher preferences for leisure compared to their German speaking
peers. By studying LFP at the language border, I compare individuals
who differ in their cultural background but face the same economic en-
vironment and institutional background. This is similar in spirit to what
Fernández (2008) calls the epidemiological approach. It allows me to
circumvent the problem of endogenous institutional rules, which makes
the estimation of cultural effects so difficult in a standard setting.
Reforms to pension benefits over a thirty-year horizon provide vari-
ation in the financial constraints dimension. In the 1970s, pension ben-
efits could be claimed at age 65 but amounted to only about 30% of the
past wage and covered less than half of the working population. By the
end of the 1990s, pension benefits amounted to about 60% of the past
wage for a large majority of the population, and provided at least a ba-
sic pension to everyone.3 The full retirement age (FRA) stayed the same
65, but different options allowed individuals to claim pension benefits
as early as 57 already. Since the use of pension savings as collateral for
loans is strongly regulated and only allowed in limited instances, these
policy changes significantly loosened the financial constraints for indi-
viduals approaching FRA.
I find that in 2000, looser financial constraints translate into labor
force participation differences of almost three percent in favor of Ger-
man speaking individuals near FRA. This is a drastic change compared to
1970 where there is no difference across cultural groups. I argue that the
decrease in pension benefits eligibility age in the 1980s and 1990s loos-
ened the financial constraints, and gave more room for culturally shaped
preferences to affect labor force participation. The LFP of younger indi-
viduals confirms these patterns. The financial constraints for the young
were strong and constant over time, fully offsetting the effects of cul-
ture both in 1970 and in 2000. Altogether, the results suggest that cul-
ture and other economic factors do not simply add up. Economic factors
dominate, while culture creates heterogeneity in their impact as soon as
individuals are given room to adjust their behavior.
Differences in norms and beliefs are likely to be responsible for the
results. Romance speaking individuals, who have a lower LFP before
FRA in 2000, display higher preferences for leisure and wish to retire
earlier than their German speaking peers. These preferences seem stable
across age groups and over time. Factors that generally explain LFP do
not seem to play a role in the estimated effects. Differences in health
are negligible. Wages are similar on either side of the language border,
and labor markets are well integrated. Savings differences exist but are
in favor of the German speaking regions (Guin, 2016). Tax rates vary
smoothly across the language border (Eugster et al., 2013). Female la-
bor supply differs around child bearing age (Steinhauer, 2013) but con-
verges after it. Finally, factors like religion, marital status, and education
are controlled for.
This study ties to the literature on cultural effects in economics.
Three papers are related in terms of methodology and context.
Eugster et al. (2011) study the impact of culture on demand for social
insurance. They show that Romance speaking individuals support ex-
pansions of social insurance programs much more than their German
speaking neighbors. Steinhauer (2013) studies fertility and female LFP.
He finds that labor force participation of mothers is higher on the Ro-
mance speaking side, while childlessness is higher on the German speak-
ing side. Eugster et al. (2017) study whether attitudes towards work af-
fects unemployment duration in Switzerland. They show that there is
a 22% difference in unemployment duration (Romance speakers stay
unemployed longer). My study complements these three papers by pro-
viding new evidence on the impact of culture on labor force exit in the
same settings, and goes further by considering its effects over time.
Cultural effects on labor force participation have been the fo-
cus of several papers. Fernández et al. (2004), Fernández (2007),
3
Federal Social Insurance Office 2013.
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Fernández and Fogli (2009), Fogli and Veldkamp (2011), and
Fernández (2013) study how female labor force participation and fer-
tility are affected by social norms and cultural heritage. Moriconi and
Peri (2015) look at labor-leisure preferences in Europe using first- and
second-generation migrants. Giavazzi et al. (2013) consider the effects
of cultural attitudes on the employment rate of females and young peo-
ple. Other papers are related as well. Ichino and Maggi (2000) shows
that individual background and work environment can explain large
regional differences in shirking in a large Italian bank. Algan and
Cahuc (2005), and Alesina and Giuliano (2010) explore family culture
and its impact on economic behavior. Algan and Cahuc (2009) study on
the role of civic virtue in shaping public insurance against unemploy-
ment risks in a cross-country setting. My study adds to these papers by
showing that culture and financial constraints interact. The relationship
between the economic environment and the impact of culture suggests
that studying cultural factors while keeping everything else fixed does
not allow for a complete understanding of their effects. It might allow
to find effects in some cases but it is likely to under-state them in many
others because of the underlying factors at play.
The rest of the paper is organized as follows. Section 2 intro-
duces the Swiss language regions, and discusses the pension system.
Section 3 presents the data. Section 4 motivates the empirical design.
Section 5 presents descriptive evidence. Section 6 details the empirical
strategy. Section 7 presents the main results of the study. Section 8 dis-
cusses mechanisms potentially driving the results. Section 9 provides
robustness checks. Section 10 concludes.
2. Background
2.1. Languages
Switzerland counts four national languages. As of 2000 it has a pop-
ulation of about 7.3 million inhabitants, of which 63.7% speak German
as their main language (or rather Swiss-German as there are many lo-
cal variations of it), 20.4% speak French, 6.5% speak Italian, and 0.5%
speak Romansh.4 These different languages are the result of numerous
events that took place since the 13th century. See Büchi (2000) for
a detailed on the history of Switzerland’s language regions. German,
French, and Italian officially became national languages in 1848, while
Romansh joined them in 1938. The spatial dispersion of the language
regions has been very stable since the end of the 18th century. As noted
by Grin (1999), it is also worth emphasizing that the French speaking
areas have never been part of France, nor have the German and Italian
speaking ones been part of Germany and Italy.
In the rest of this study, I group the four language regions into
two larger ones. Regions where individuals speak French, Italian, or
Romansh form the Romance speaking region, while those where indi-
viduals speak German form the German speaking region. Two reasons
support this grouping. First, from a linguistic perspective, all four lan-
guages belong to the Indo-European family. However, German is part
of the Germanic genus, while French, Italian, and Romansh are tied to
the Romance genus. This difference gives rise to grammar differences,
such as future time reference, which has been shown to affect intertem-
poral choices (Chen, 2013).5 Second, and more importantly, individuals
4
The remaining 8.9% speaks a foreign language as their main one. Source:
Swiss Census 2000, Federal Statistical Office (FSO).
5
Chen shows that individuals who speak a language that gramatically asso-
ciates present and future (e.g. German) display more future-oriented behavior
(e.g. higher savings, retiring with higher wealth) than people who speak a lan-
guage with weaker future-time reference (e.g. French or Italian). His results rely
on within country language differences, and Switzerland is a key source of vari-
ation for his estimations. Most of the differences I document in my study are
in line with his results. It is not clear however how future-oriented behavior
would drive (early) retirement decision as factors such as higher savings allows
individuals to retire earlier, but better health could make them work longer. Ul-
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Fig. 1. Language regions in Switzerland.
Notes: Fig. 1 shows the main language spoken in each Swiss municipality. Light
grey areas indicate that the majority of individuals speak a Romance language
(French in the West and South-West, Italian in the South-East, and Romansh
in the East), while dark grey areas indicate a majority of German speakers.
Thick lines indicate canton borders, and thin lines indicate municipality bor-
ders. White areas are lakes.
Source: Own calculations based on the Swiss Census 2000, Federal Statistical
Office (FSO).
from the Romance speaking areas display similar preferences, which of-
ten contrast with those that German speaking individuals exhibit. The
language differences are thus often associated with strong cultural dif-
ferences. This approach is consistent with Falck et al. (2012), who ar-
gue that local dialects are closely related to cultural differences across
regions in Germany. In a different context but supporting the same ar-
gument, Clots-Figueras and Masella (2013) show that speaking a certain
language indeed shapes individuals’ identity and preferences.
For each municipality, I compute the share of individuals speaking
German. I then define a municipality as being German speaking if its
share of German speakers exceeds 50%, and Romance speaking other-
wise. Fig. 1 shows the main language spoken in each Swiss municipality.
The different languages spoken split Switzerland into clear regions,
although their boundaries are neither official, nor do they necessarily
follow institutional (e.g. cantonal) or geographical (e.g. the Alps) bor-
ders. The French speaking West is influenced by French culture. From
TV programs to culinary habits, individuals growing up in this area
have much in common with their bigger neighbor. Similarly, the Italian
speaking South tends to follow Italian traditions. On the other hand, the
German speaking Center and North is closer to Germany.
A concern is that grouping municipalities on the basis of a spoken
language majority rule can mask a much smoother and gradual process,
where language areas blend in and do not split the country into well
defined groups. However, this is not the case. Consider the imaginary
line separating the light grey and dark grey areas on Fig. 1, which is
commonly referred to as the language border. It corresponds the official
physical border between two municipalities that speak a different lan-
guage and are geographically next to each other. A variable representing
the distance to the language border can be constructed by finding the
shortest road distance between a municipality center (usually its main
town) and the nearest segment of the language border.6 It is then pos-
sible to represent the language regions by plotting the proportion of
timately attitudes/preferences towards work and leisure should be driving the
results.
6
Note that other studies such as Eugster et al. (2011), Steinhauer (2013),
and Eugster et al. (2017) use a slightly different approach to construct the lan-
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Fig. 2. Proportion of German speakers.
Notes: Fig. 2 shows the proportion of German speakers on either side of the
language border. Scatter points are municipality level averages grouped in 2 km
bins. Lines are locally weighted regression estimates with bandwidth of 0.8. Only
Swiss-born individuals are considered.
Source: Own calculations based on the Swiss Census 2000, Federal Statistical
Office (FSO).
German speakers against the distance to the language border, which is
what Fig. 2 does. The distance to the language border for the Romance
side is set as negative to construct the graph.
The language border is a sharp divide between language groups. The
average proportion of German speakers jumps from about 15% in the
ten kilometers closest to the language border on the Romance side, to
over 80% in the ten kilometers closest to the border on the German side.
2.2. Pension system
Switzerland’s pension system traces back to 1947, when citizens ap-
proved the introduction of an “old-age and survivors” insurance in a
popular vote. The old-age insurance is implemented in January 1948.
It offers very modest pension benefits of at most SFr 200 for a couple
monthly, worth about ten percent of the average salary (equivalent to
SFr 860 in 2000 prices).7 All employed and self-employed individuals
must pay four percent of their income into it, while individuals not earn-
ing work income but under the FRA pay between SFr 12 and 600. The
FRA is 65 for males and 64 for females.8 In addition, some individuals
are affiliated with private pension funds, although this is not mandatory.
About 25% of the active labor force is affiliated with such a scheme in
1950.9
Nine small adjustments are made between 1948 and 1970, increasing
the monthly pension benefits to SFr 640 or about 30% of the average
salary (equivalent to SFr 1,760 in 2000 prices). In 1969, the amounts
that must be paid to finance the pension scheme increase to 5.2% for
employed individuals, 4.6% for self-employed individuals, and between
SFr 40 and 2000 for non-working individuals under FRA. The share of
guage border. Section 9 shows that defining the language border using stricter
language majority rules does not affect the results.
7
Numbers in this subsection come from the Federal Social Insurance Office
and Leimgruber (2008). SFr 1 ≃ USD 0.6 ≃ EUR 0.65 in July 2000.
8
The FRA for males has been set to 65 from 1948 and remained the same
until now. For females, it was initially set to 65, lowered to 63 in 1957, lowered
again to 62 in 1964, increased to 63 in 2001, and increased again to 64 in 2005.
9
The private pension plans available before the implementation of the reform
of the pension system in 1985 cannot be compared directly with plans available
after the reform. Their terms, conditions, and funding scheme are highly het-
erogeneous.
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individuals enrolled in private pension schemes is about 40% in 1970.
In 1975, 541,044 women and 317,163 men received average monthly
pension benefits of SFr 697 and 698 respectively.
In 1972, another popular vote approves a large reform of the pension
system. It adopts a compromise between a public and a private pension
system, while significantly increasing the pension benefits. Details take
time to be ironed out and the full implementation of the pension sys-
tem only takes place in 1985. The modern version of the Switzerland’s
pension system is based on three “pillars”.
The first pillar is a mandatory public pay-as-you-go scheme which
aims to cover individuals’ basic needs after retirement. All individuals
living or working in Switzerland are subject to it.10 Working individuals
start paying an income tax when they reach 17, while non-working in-
dividuals may delay payment until they reach 20. The first pillar has an
important redistributive aspect as contributions are proportional to the
income but benefits are capped. Benefits of the first pillar correspond
to about 30% of the previous wage for an average earner. In 2000, the
amounts that must be paid to finance the pension scheme are 8.4% for
employed individuals, 7.8% for self-employed individuals, and between
SFr 324 and 8,400 for non-working individuals under FRA. In the same
year, 751,785 women and 447,325 men received average monthly first
pillar pension benefits of SFr 1,591 and 1,526 respectively. First pillar
pension savings cannot be used as collateral for loans or for any other
purpose before retirement.
The second pillar is a mandatory funded scheme aiming to help indi-
viduals to maintain pre-retirement quality of life. Working individuals
over 17 and earning at least SFr 21,500 are subject to it, while is it op-
tional for self-employed individuals. As of 2000, almost 80% of the total
active labor force is affiliated with a second pillar fund. The coverage is
lower than 100% as self-employed individuals are not obliged to have a
second pillar, and most unemployed individuals are not enrolled in any
either. The second pillar is funded by employer and employees. Both
contribute into a pension fund which employees can access when reach-
ing retirement age. The money accumulated in the second pillar can be
used before retirement under strict conditions, such as buying a house,
starting a self-employed activity, or if leaving Switzerland permanently.
In case where an individual changes employer, funds are transferred to
the new company’s pension fund. Funds are transferred to a savings ac-
count in case of unemployment. Like the first pillar, pension benefits of
the second pillar offer a replacement rate of about a third. However, the
amounts (or rate) that individuals must pay can vary depending on their
employer, and even within employer based on contract type. The total
amount of pension funds reserves is about 500 billions in 2000 (110%
of GDP).11
The third pillar are tax-deductible voluntary pension savings ac-
counts and/or insurance contracts. They encourage individuals to save
part of their revenues for their old years to top-up the benefits that they
will get from the first two pillars. All individuals living and working in
Switzerland can opt in. The third pillar is tax deductible but capped at
SFr 6,768 per year for individuals benefiting from a pension fund (as
part of their second pillar) and 20% but at most SFr 33,840 per year for
individuals without a pension fund (mostly self-employed). Again, the
funds can be used before retirement age under strict conditions, such as
leaving Switzerland permanently, repaying existing mortgages, buying
property, starting a business, and in case of disability. As of 2000, about
11% of the active labor force had a third pillar pension plan.12
Although the FRA is set at 65 for males and 64 for females, it is not
mandatory and individuals who wish to retire earlier (or later) can do
so (Lalive and Staubli, 2016). Claiming pension benefits from the sec-
10
Swiss citizens living abroad may opt in if they wish.
11
The same figure for 1970 is 37.1 billions (35% of GDP).
12
Statistics on third pillar contracts are usually not disclosed. This estimation
for 2000 comes from discussions with bank/insurance employees specialized in
this line of business. Third pillar contracts did not exist in 1970.
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Fig. 3. Decrease in early claiming age of pension benefits.
Notes: Fig. 3 shows the evolution of pension benefits availability over time, as a
function of age. Note that the fraction of benefits available at a given age may
be slightly lower for some individuals if their pension fund reduces benefits in
the case of early claiming or if benefits have been used for other purposes.
Source: Own calculations based on data from the Federal Social Insurance Office
(FSIO).
ond pillar before FRA is possible since 1985, while claiming those from
the first pillar is only possible since 1997.13 Benefits from the first pil-
lar can be claimed up to two years before FRA with an actuarially fair
reduction of the benefits of 6.8% and 13.6% respectively.14 In case of
postponement, pension benefits increase by 5.2% for one year, and up
to 33% for five years (maximum, then benefits are capped). As for the
second pillar, retirement can happen as early as 57 but the exact condi-
tions are to be determined by the pension fund and the generosity of the
employer. Finally, third pillar savings can be claimed up to five years
before FRA for both males and females. Third pillar savings account do
not penalize for early claiming, but insurance contracts often do.
Fig. 3 shows the evolution of pension benefits availability over time,
as a function of age. The main difference between 1970 and 2000 is
the availability of early pensions from the 2nd pillar from age 57, from
the 3rd and 2nd pillars from age 60, and all three from age 64. This
step function illustrates how pension reforms loosened the financial con-
straints for individuals approaching FRA.
3. Data
This study builds on census data to estimate labor force participation,
and survey data to study individuals’ preferences. I use the weights pro-
vided in all surveys to ensure national and regional representativeness.
The Swiss Census (officially called the Federal Population Census)
has been conducted every ten years since 1850. It surveys the whole
population to understand demographic, spatial, social and economic de-
velopments of the country. Its coverage is almost complete as in 2000,
only 0.13% of the population did not take part in the Census. The last
Swiss Census was conducted in 2000, while a major revision took place
in 2010. I use three waves of the Swiss Census, namely the 1970, 1990,
and the 2000 waves. These waves contain socio-demographic informa-
tion, birth place, living place (geo-referenced up to building location),
citizenship, languages, schooling, household characteristics, and several
work related variables.
13
Early claiming of second pillar benefits follows the introduction of the LPP
law in 1985, while claiming first pillar ones results from the 10th revision of the
AVS law in 1997.
14
1st pillar benefits can be claimed from age 64 since 1997, and from age 63
since 2001.
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The International Social Survey Programme (ISSP) is a cross-national
survey collecting information on topics related to social science. The
1997 wave contains the Work Orientation module, which measures
attitudes towards work, and information on the employment status
(ISSP Research Group, 1999).
The European Social Survey (ESS) measures attitudes, beliefs and
behaviors in more than thirty countries across Europe. I use the core
module to extract basic information on individuals (e.g. gender, age,
living place, languages) and the rotating module on family work and
well-being. Both come from the fifth round of the survey conducted in
2010 (ESS Round 5, 2010).
The World Values Survey (WVS) is also a large cross-national sur-
vey. It started in 1981 and collects information on human beliefs and
values for almost 100 countries in the World. I only use the 1996 wave
(World Values Survey, 1996).
The Survey of Health, Ageing and Retirement in Europe (SHARE) is
a multidisciplinary and cross-national panel database. It focuses specifi-
cally on individuals aged 50 or older and contains information on health,
socio-economic status and social networks. I only use the first wave
(SHARE, 2004). See Börsch-Supan et al. (2013) for methodological de-
tails.
4. A natural experiment
4.1. Socio-demographic characteristics
Individual and municipality level determinants of LFP should not
change drastically at the language border for the empirical design to
yield reliable estimates of the effects of culture. Table 1 displays in-
dividual characteristics at the language border for 1970 and 2000. The
sample includes Swiss males aged between 25 and 64 born within 30 km
of the language border. The first two columns report the mean and stan-
dard error (clustered at the municipality of birth level) for the Romance
side, while columns three and four report them for the German side.
Columns five and six provide the within canton regression discontinu-
ity (RD) coefficient at the language border. It is obtained by regressing
each variable on a binary indicator equal to one for individuals on the
German side of the language border, while controlling for the distance
to the language border, for its interaction with the binary indicator, and
for canton fixed effects.15
Most characteristics are balanced across the border, and most are
also stable over time. Individuals on the Romance side have a slightly
lower education level on average but the difference is not significant
at the language border. Age profiles are almost identical. The largest
differences arise from religion. The share of Catholics is higher on the
Romance side, while there are more Protestants on the German side. For
the rest, Romance individuals face a marginally higher unemployment,
and tend to work more for public companies.
The main analyses in Section 7 control for various socio-
demographic characteristics to account for these small discrepancies.
The case of religion is more complicated as religion is arguably part of
culture, and this difference across the language border may also have im-
pacted local norms and institutions. Religion has also been shown to af-
fect attitudes towards work (Basten and Betz, 2013). Section 7 first pro-
vides results without controlling for religion but Section 9 then shows
how controlling for it at the individual level does not affect the results.
4.2. Mobility
Mobility patterns are important for different reasons. On the one
hand, high mobility across language regions would threaten the validity
of using language regions as a proxy for belonging to a certain cultural
group. For example, a career driven young French speaker may decide
15
The model is given by Eq. (1) in Section 6.
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Labour Economics 000 (2018) 1–18
to move to a German speaking city like Zurich, which could offer better
career prospects. If not accounted for, mobility may therefore artificially
create “cultural” effects that are in fact due to unrelated unobservable
factors. On the other hand, sufficiently high work related mobility is
important to ensure that labor markets on either side of the language
border are well integrated. Fortunately, The Swiss Census offers four
variables that can be used to assess geographic mobility: commuting
time, current place of residence, municipality of birth, and municipality
of work.16
The 2000 Swiss Census indicate that about 40% of all Swiss-born
males aged 25 still live in the municipality where they were born. This
fraction decreases slowly to stabilize around 30% for individuals aged
50, and increases again for older ones. The pattern is similar for 1970,
with about 40% of all Swiss-born males aged 25 living in the munici-
pality where they were born. However, this fraction reaches its lowest
level of 35% for individuals aged 30, and increases for older ones.
Residential mobility across language regions is lower. As of 2000,
only 4.7% of Swiss-born males aged between 25 and 70 currently live
in another language region than the one they were born in. However,
the two language groups are not equal movers. 8.6% of Romance-born
individuals now live in a German speaking area, but only 3.5% of indi-
viduals born in a German speaking region have done the opposite move.
The RD coefficient on the probability of having crossed the language
border shows a significant difference of −0.09 (s.e. 0.024). These fig-
ures were higher in 1970, as 10% of Romance-born individuals were
living in a German speaking municipality, and 4.4% of individuals born
in a German speaking region lived in a Romance speaking region. The
RD coefficient also shows a significant difference of −0.08 (s.e. 0.017)
in 1970.
These findings suggest that there are some specific patterns both
across language regions, and over time. Differences in residential mo-
bility are a concern as the identification strategy relies on comparing
the LFP of individuals on either side of the language border. To over-
come this issue, I use the municipality of birth of individuals to attribute
them to a language region (instead of their current place of residence)
and calculate their distance to the language border. In terms of cross
region mobility, this means that all Romance-born individuals who live
in a German speaking municipality are coded as part of the Romance
speaking group, and vice versa. This way of proceeding has the benefit
to remove the potentially endogenous migration, at the cost of diluting
the cultural effects measured. In light of within region mobility patterns,
this implies that the distance to the language border is a few kilometers
smaller that it would be if the place of residence were used. As the place
of residence and the municipality of birth are the same for 30 to 40% of
individuals in the sample, the advantages of using this approach likely
outweigh its costs.
Work related mobility shows that Romance and German individuals
have a similar commuting time. About 65% of them report commuting
for less than 15 minutes in 2000, down from 72% in 1970. RD coeffi-
cients are −0.02 (s.e. 0.015) in 2000, and −0.02 (s.e. 0.018) in 1970.
Finally, work related mobility across language regions shows some
differences. In 2000, 15% of individuals living in a German speaking mu-
nicipality report working in a Romance speaking one. In comparison, it
is almost 25% of individuals living in a Romance speaking municipal-
ity who cross the language border daily for work. The RD coefficient
shows a significant difference of −0.03 (s.e. 0.008). In 1970, eight per-
cent of individuals living in a German speaking municipality work in
a Romance speaking one, and eleven percent of individuals living in a
Romance speaking municipality commute in the opposite direction. The
RD coefficient is −0.00 (s.e. 0.006).
These figures on work related mobility across language regions, an
important aspect of labor market integration, are positive. A significant
16
Formally, the municipality of birth is defined as the municipality where an
individual’s parents lived at the time of birth.
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Table 1
Individual characteristics near the language border.

Romance side German side RD coefficient

Variable 1970 2000 1970 2000 1970 2000

Education
At least compulsory 0.95 0.96 0.95 0.97 −0.000 0.000
(0.00) (0.00) (0.00) (0.00) (0.004) (0.003)
At least secondary 0.57 0.82 0.69 0.88 0.004 −0.012
(0.02) (0.01) (0.02) (0.01) (0.042) (0.018)
At least tertiary 0.15 0.27 0.17 0.33 −0.009 −0.012
(0.01) (0.01) (0.01) (0.01) (0.017) (0.022)
Age
Average 44.01 43.87 43.76 43.64 0.172 0.054
(0.19) (0.16) (0.10) (0.22) (0.366) (0.374)
Religion
Protestant 0.36 0.24 0.65 0.48 0.120 0.120
(0.04) (0.02) (0.03) (0.48) (0.035) (0.038)
Catholic 0.60 0.61 0.31 0.32 −0.116 −0.105
(0.04) (0.04) (0.03) (0.32) (0.035) (0.035)
Other/None 0.03 0.15 0.04 0.20 −0.005 −0.016
(0.00) (0.01) (0.01) (0.20) (0.005) (0.016)
Work type
Part-time 0.03 0.07 0.03 0.08 −0.001 −0.005
(0.00) (0.00) (0.00) (0.00) (0.002) (0.004)
Full-time 0.93 0.81 0.94 0.82 0.004 0.018
(0.00) (0.00) (0.00) (0.01) (0.003) (0.007)
Unemployed 0.04 0.11 0.04 0.09 −0.003 −0.015
(0.00) (0.00) (0.00) (0.00) (0.002) (0.004)
Job sector
Primary 0.12 0.07 0.09 0.05 0.032 0.018
(0.01) (0.01) (0.02) (0.01) (0.029) (0.016)
Secondary 0.49 0.28 0.51 0.29 −0.023 0.029
(0.01) (0.01) (0.01) (0.01) (0.016) (0.016)
Tertiary 0.38 0.55 0.40 0.58 −0.009 −0.037
(0.01) (0.01) (0.02) (0.02) (0.025) (0.026)
Employer type
Private company 0.81 0.71 0.81 0.74 0.012 0.039
(0.00) (0.00) (0.01) (0.01) (0.009) (0.007)
Public company 0.19 0.18 0.19 0.16 −0.011 −0.029
(0.00) (0.00) (0.01) (0.01) (0.008) (0.007)
Number of observations 127,162 131,281 239,003 280,679 366,165 411,960

Notes: Table 1 reports individual characteristics near the language border. The sample in-
cludes Swiss males aged 25–64 born within 30 km of the language border. Some categories
may not sum up to one due to missing observations. The RD coefficient is obtained by re-
gressing each variable on a binary indicator equal to one for individuals on the German side
of the language border, while controlling for the distance to the language border, for its in-
teraction with the binary indicator, and for canton fixed effects. Standard errors clustered at
municipality of birth level.
Source: Own calculations based on the Swiss Censuses 1970 and 2000, Federal Statistical
Office (FSO).

share of individuals living on either side of the language border crosses
it daily for professional reasons. While individuals from the Romance
side are three percentage point more likely to do so, this only represent
a small difference relative to the average. Workers seem to be able to
work wherever suits them best.
4.3. Wages, taxes, and wealth
It would be problematic if factors like wages, taxes, and wealth
differed across language regions. Romance speaking individuals leave
the labor force earlier than their German speaking peers. Higher wages
and/or a higher propensity to save could translate into higher wealth,
in turn allowing Romance individuals to retire earlier. The Swiss Cen-
sus does not provide the individuals’ wage and wealth, which makes it
impossible to control for at the individual level.
However, there are reasons to think that this is not a problem. Sev-
eral studies show that there is no sharp difference in wages across the
language border using various data sources (Eugster et al., 2017; Eugster
et al., 2013; Steinhauer, 2013). An issue is that these studies focus on
recent years only. To address this, I use data on the Federal Direct Tax
(FDT), which is a tax on earnings that everyone living in Switzerland
has to pay. The tax does not vary across cantons or municipalities, and
the total amount collected by each municipality is available from 1973,
making it a good proxy for individuals’ earnings.17 Fig. 4 shows that, on
average, Romance individuals paid a slightly lower amount of FDT than
their German speaking peers in 1973. But more importantly, there is no
gap at the language border. The results are similar for 1993.18 These
findings suggest that there is no discontinuity in wages at the language
border, which again points towards well integrated labor markets.
FDT aside, canton and municipality disparities in taxes could al-
ter the financial incentives to retire. Differences across cantons are not
a problem as the empirical design relies on within canton variation.
Eugster et al. (2013), who study tax competition across Swiss munici-
17
This measure is very sensitive to outliers as very rich individuals can signif-
icantly affect the average in smaller municipalities. I deal with this problem by
removing the top percentile.
18
The reason for comparing 1973 to 1993 is the availability of the same data.
The Federal Tax Administration changed the way they report the FDT after 1993,
making the comparison with more recent years very difficult.

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Fig. 4. Federal Direct Tax, municipality average.
Notes: Fig. 4 shows the amount of Federal Direct Tax paid on average in Ro-
mance and German speaking municipalities. Scatters are municipality level av-
erages grouped in 2 km bins. Lines are locally weighted regression estimates
with bandwidth of 0.8. Note the change of scale of the Y-axis between the two
graphs.
Source: Own calculations based on the Direct Federal Tax for 1973–1974 and
1993–1994, Federal Tax Administration (FTA).
palities, show additionally that there is no discontinuity in tax rate at
the language border.
Regarding wealth, Guin (2016) studies the propensity to save across
Swiss language regions using a large panel dataset with information on
financial habits. As previous studies, his approach relies on comparing
individuals on either side of the language border while controlling for
socio-demographic characteristics. He shows that savings differences at
the language border do exist but that it is the German speaking regions
that are twelve percentage points more likely to save. He suggests that
differences in relying on consumer credits, and impatience could be re-
sponsible for the savings behaviors. With similar wages and a lower
propensity to save, it is therefore unlikely that LFP differences at the
language border are driven by higher wealth levels on the Romance
side.
Finally, Eugster et al. (2017) find no significant difference between
the Romance and the German sides in terms of vacancies per labor force,
7
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Fig. 5. Different attitudes towards retirement.
Notes: Fig. 5 plots kernel density estimates of the ideal retirement age. Epanech-
nikov kernel with a bandwidth of 1.2 is used. The sample includes males living
in Switzerland.
Source: Own calculations based on the European Social Survey 2010 (ESS5),
“Family, work and well being” module.
inflow into unemployment, and commuting across the language bor-
der. They conclude that labor market integration is similar on either
side of it. Their findings are in line with those of Cattaneo and Winkel-
mann (2005), who study wage discrimination for workers who crossed
the language border, and show that labor markets are well integrated.
5. Descriptive evidence
5.1. Attitudes towards work and retirement
Guiso et al. (2006) argue that three steps are necessary to identify
causal effect from culture to economic outcomes and avoid ex-post ra-
tionalization. The first step is to show a direct impact of culture on ex-
pectations, preferences, and/or constraints.
The ESS 2010 asks about the age that individuals would like to, or
would have liked to, retire. Individuals may state a precise age. Fig. 5
shows the densities of the answers that males from the different Swiss
language regions gave. I restrict the plot to answers between 55 and 70
for clarity. We can see two masses in the densities of answers for German
speaking individuals. The biggest one is at 64, one year before FRA,
while a second one is around 61. For the Romance speaking individuals,
the picture is the opposite. Most individuals state that 60 is the ideal
retirement age, while another fraction prefers to retire around 64–65.
These findings suggest that there is a significant difference in the way
the two language regions perceive retirement.
Another way to measure people’s preferences is to look at voting
results. Switzerland’s direct democracy system allows its citizens to ex-
press their opinion and influence policy making on a regular basis. The
vote on lowering the FRA to 62 for both males and females in 2000 is one
of the many example showing the significant divide between Romance
and German speaking regions.19 More that 60% of Romance speaking
individuals voted in favor of lowering the FRA, while less than 40% of
German speaking individuals supported it.20
Swiss citizens refused to lower the retirement age in 1978 already.21
At that time, over 30% of Romance speakers and less than 20% of Ger-
19
Reference: FF 2001 1077. November 26, 2000.
20
As the share of German speaking individuals outweighs that of Romance
speaking ones, lowering the FRA received 54% of negative votes overall and
was therefore refused.
21
Reference: FF 1978 I 1093. February 2, 1978.
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Fig. 6. Male LFP by age (2000).
Notes: Fig. 6 shows Swiss-born male labor force participation (LFP) of German
and Romance speakers. The vertical dotted line at 57 represents the early retire-
ment age (ERA), while that at 65 represents the full retirement age (FRA).
Source: Own calculations based on the Swiss Census 2000, Federal Statistical
Office (FSO).
Fig. 7. Male LFP over time.
Notes: Fig. 7 shows Swiss-born male labor force participation (LFP) over time.
The vertical dotted line at 65 represents the full retirement age (FRA).
Source: Own calculations based on the Swiss Censuses 1970, 1990, and 2000,
Federal Statistical Office (FSO).

man speakers were in favor of lowering the FRA. While the support on
both sides of the language border was much lower than in 2000, the di-
vide remains marked and its magnitude is identical. Voting results thus
support the survey evidence that the two language regions have differ-
ent views about work and retirement. Also, while local preferences may
evolve over a thirty-year horizon, the cultural divide is already observ-
able in the 1970s.
Additionally, Eugster et al. (2017) show that Romance speakers en-
joy working less than German speakers, and display higher support for
working-time regulation at the intensive margin (e.g. vacation, work
hours) but also at the extensive margin (e.g. male and female retire-
ment age) using survey data and various votes. In another article,
Eugster et al. (2011) find evidence for higher demand for social insur-
ance and redistribution by Romance speaking individuals.

5.2. Labor force participation

The next step is to show that culture has an impact on economic
outcomes. The economic outcome of interest in this study is labor force
participation. Fig. 6 shows Swiss-born male labor force participation
(LFP) for the year 2000. LFP is a dummy variable equal to one if the
individual is employed or unemployed but actively looking for a job, and
to zero otherwise. As before, I contrast Romance speaking individuals
and German speaking ones, and plot LFP against age.
Both groups show a very similar LFP from the age of 25. German
speakers are always slightly above Romance speakers, although the dif-
ference is small. LFP is very high until age 50, with a rate close to 95%.
Cultural differences do not seem to play an important role before in-
dividuals reach the second half of their careers. However, the picture
changes completely after that. Past 50, the two groups start diverging,
with Romance speaking individuals leaving the labor force faster than
their German speaking peers. The difference in LFP is 6.3 percentage
points (or 7.3%) in favor of the German speakers at age 57, the earli-
est age at which most individuals are eligible to claim 2nd pillar pen-
sion benefits.22 The two groups have a similar rate again when reaching
the FRA at 65. Differences in attitudes towards work therefore seem to
have a large impact on labor force participation. However, this impact is
22
The average LFP of Romance speaking individuals is 86.21% at age 57,
against 92.46% for German speaking ones.
Fig. 8. Male 57–64 LFP at the language border.
Notes: Fig. 8 plots the labor force participation (LFP) of Swiss-born males aged
57–64 on both sides of the language border. Scatters are municipality level av-
erages grouped in 2 km bins. Lines are kernel-weighted local polynomial regres-
sions of degree one with bandwidth 10 (Epanechnikov kernel).
Source: Own calculations based on the Swiss Censuses 1970 and 2000, Federal
Statistical Office (FSO).
not heterogeneous across ages but only materializes in the last years of
working life, which also correspond to the period when early claiming
of pension benefits becomes possible.
Comparing the different waves of the Census shows how LFP evolved
in the last decades. Fig. 7 plots LFP by age between 1970 and 2000.
We observe that LFP for individuals under 55 has barely changed in 30
years. It was highest in 1970, reaching almost 98%, stayed the same in
1990, and decreased to 95% in 2000. However, we observe significant
differences across waves in the last years before FRA. Of all Swiss-born
males aged 60 in 1970, 92% of them still worked. This compares to 90%
in 1990, and only 79% in 2000. Considering individuals aged 64, 82%
of them still worked in 1970, but only 67% did so in 1990, and just 50%
in 2000. These numbers show a clear decrease in LFP in the last years
before FRA.
Fig. 8 shows the same indicator but plotted against the distance to the
language border instead of age. The purpose of it is to examine whether
LFP levels vary smoothly across language regions, or if there exists a

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discrete change when switching from one to the other. Not all individu-
als are considered anymore but only those whose municipality of birth
is located within 50 km of the language border. I focus on Swiss-born
males aged between 57 and 64, that is individuals in age of claiming
early pension benefits. Municipalities are grouped in 2 km bins before
computing the average for each bin. I plot the same indicator for 1970
and 2000.
In 2000, we observe a lower LFP for Romance speakers. The aver-
age 50 km from the language border on the Romance side is 69%. It
increases smoothly to reach 72% at the language border. Crossing the
language border corresponds to a seven percentage point jump in LFP,
which then flattens. These findings show that, in addition to having dif-
ferent LFP levels across language regions, a discrete jump happens right
at the language border.
The change between 1970 and 2000 is large and happens on two
dimensions. First, LFP on both sides of the language border decreased
significantly, losing between 10 and 20 percentage points. This result is
in line with other studies such as Blau and Goodstein (2010), who show
that LFP of older men is strongly affected by changes in the pension
eligibility age. Second, the LFP gap at the language border did not exist
in 1970. LFP has fallen more on the Romance side than on the German
side, creating a discrete jump right at the language border. This suggests
that Romance individuals have reacted more to the pension reforms.
6. Empirical strategy
6.1. Identification
Following the “Local Border Contrast” (LBC) approach of
Eugster et al. (2017), I use a reduced form equation to explain
LFP. Let yims be the labor force participation status of individual i, who
is born in municipality m, which belongs to society s (either Romance
or German speaking). yims is equal to one if the individual is employed
(part time or full time) or unemployed but actively looking for a job,
and to zero otherwise. The estimated model is given by:
𝑦𝑖𝑚𝑠 = 𝛼0 + 𝛼1 𝐺𝑒𝑟𝑚𝑎𝑛𝑚 + 𝛼2 𝐷𝑖𝑠𝑡𝑎𝑛𝑐𝑒𝑚
+ 𝛼3 𝐺𝑒𝑟𝑚𝑎𝑛𝑚 × 𝐷𝑖𝑠𝑡𝑎𝑛𝑐𝑒𝑚 + 𝜖𝑖𝑚𝑠
where Germanm is a dummy variable equal to one if municipality m is
located in a German speaking region and zero otherwise. Distancem is the
distance between the municipality of birth m and the closest segment
of the language border. The main parameter of interest is 𝛼 1 , which
captures cultural factors influencing LFP.
The LBC provides true estimates of cultural effects if the following
two requirements are met: (i) culturally shaped factors influencing LFP
jump at the language border; (ii) other determinants of LFP follow a
continuous pattern. Section 4 already discussed condition (ii), while
Section 5 has documented a strong discontinuity in cultural factors.
Note that the LBC is similar to a spatial regression discontinuity de-
sign (Lee and Lemieux, 2010) but not identical as the assumed ran-
domness at the cutoff point, in this case the language border, is not
necessarily satisfied. The LBC uses geographic proximity as a way to
control for unobservable characteristics. It is used in conjunction with
canton fixed effects, as well as individual and municipality level con-
trol variables. Individual controls include education, age, and marital
status. Municipality controls include size, share of workers in the pri-
mary/secondary/tertiary sectors, and road distances to the closest Ro-
mance and German speaking countries.23 The cultural effects are iden-
tified through within canton variation in the main language spoken by
23 Two distances are computed for each municipality. The first one is the clos-
est road distance to either France or Italy, which are two Romance speaking
neighboring countries. The second one is the closest road distance to either Ger-
many or Austria, which are two German speaking neighboring countries. These
distances are meant to capture the potential influence of Switzerland’s bigger
“neighbors”.
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Labour Economics 000 (2018) 1–18
municipalities, therefore excluding institutional differences. They are
further refined by controlling for observable individual level factors in-
fluencing LFP, and unobservable ones by using the LBC.
Eq. (1) is estimated five times for each year. The first two regres-
sions use the whole sample, and include different sets of control vari-
ables. The other three regressions divide the sample into age groups.
One group contains individuals aged between 57 and 64. For 2000, this
group contains the individuals in age of claiming early pension bene-
fits. The remaining individuals are then split into two equal groups, one
from 25 to 40, and another from 41 to 56. This choice is arbitrary but
made to capture the potential age patterns observed in Fig. 6. These age
groups are not relevant for 1970, as the modern pension system did not
exist, but are reported to ease the comparison with 2000.
7. Results
7.1. 1970
Table 2 presents the estimations of Eq. (1) for 1970. The sample
includes Swiss males aged between 25 and 64 years old, born in a mu-
nicipality located within 30 km of the language border.24 Model (1)
considers the whole sample and only includes canton fixed effects (FE).
Model (2) adds individual controls (age, religion, marital status, and ed-
ucation) and municipality level controls (size, share of workers in the
primary/secondary/tertiary sectors, and road distances to the closest
Romance and German speaking countries). Models (3) to (5) divide the
sample into three age groups.
The coefficient on German Language represents the discrete change
in LFP right at the language border, while the coefficients on Distance
and German × Distance correspond to linear trends on either side of it.
None of the coefficients is statistically significant, and their magnitude
is close to zero. These results suggest that culture did not affect male
LFP in 1970, which is in line with the descriptive evidence for the same
year (Fig. 8).
The absence of any difference at the language border also supports
the validity of the econometric approach. Variations across language
regions in terms of labor market integration, wealth, health, or any other
(1) unobservable factors driving LFP would be picked up by the coefficient
on German Language. Note that there is no significant heterogeneity in
the effects across age groups either. This is especially important in the
context of labor force exit, as one may be concerned by asymmetries in
unobserved demand side factors related to aging, such as discrimination
towards older workers. Results indicate that the two language regions
are at par on this dimension.
7.2. 2000
Table 3 presents the estimations of Eq. (1) for 2000. The estimated
models are identical to those used for 1970, but the results are very
different. Model (1) estimates average cultural effects of the order of
one percentage point, while model (2) shows that including individual
and municipality level controls only marginally affects the estimated
effects. However, this average effect hides strong heterogeneity across
ages.
Splitting the sample into three different age groups shows that the ef-
fects are mostly driven by individuals in their last working years. Model
(3) shows that individuals between 25 and 40 barely differ in their LFP
at the language border (less than half a percentage point). Model (4)
estimates a statistically significant effect for individuals aged between
41 and 56, when early pension benefits are not available yet. While
its magnitude is low in economic terms, it could reflect a difference
in labor force exit through other channels such as disability insurance.
Section 8.1 discusses this possibility. Finally, model (5) shows an im-
pact of over two percentage points for individuals between 57 and 64.
24
Section 9shows that results are unaffected by the choice of bandwidth.
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Table 2
Language border difference in male LFP (1970).

All Age 25–40 41–56 57–64

(1) (2) (3) (4) (5)

German language 0.0025 0.0011 0.0003 0.0009 0.0026

(0.002) (0.002) (0.001) (0.003) (0.005)
Distance (100 km) 0.0090 −0.0020 −0.0013 0.0013 −0.0111
(0.012) (0.010) (0.007) (0.014) (0.035)
German × Distance −0.0199 −0.0060 0.0048 −0.0101 −0.0305
(0.015) (0.010) (0.008) (0.015) (0.038)
Constant 0.9642∗∗∗ 0.4927∗∗∗ 0.3534∗∗∗ 0.5426∗∗∗ 1.4997∗∗∗
(0.002) (0.024) (0.034) (0.036) (0.112)
Individual controls No Yes Yes Yes Yes
Municipality controls No Yes Yes Yes Yes
Canton FE Yes Yes Yes Yes Yes
Adjusted R2 0.002 0.161 0.433 0.073 0.056
Individuals 366,165 366,165 152,532 145,398 68,235
Municipalities 1068 1068 1067 1068 1066

Notes: Table 2 presents the estimations of Eq. (1) with OLS for 1970. The dependent variable for all models is a
dummy variable equal to one if the individual is employed or unemployed but actively looking for a job, and equal
to zero otherwise. The sample includes Swiss males born in a municipality located within 30 km of the language
border. Individual controls include age, marital status, and education. Municipality controls include size, share
of workers in the primary/secondary/tertiary sectors, and road distances to the closest Romance and German
speaking countries. Standard errors clustered at municipality of birth level in parentheses. ∗ p < 0.10, ∗∗ p < 0.05,
∗∗∗
p < 0.01.
Source: Own calculations based on the Swiss Census 1970, Federal Statistical Office (FSO).

Table 3
Language border difference in male LFP (2000).

All Age 25–40 41–56 57–64

(1) (2) (3) (4) (5)

German language 0.0124∗∗∗ 0.0118∗∗∗ 0.0049∗∗ 0.0113∗∗∗ 0.0236∗∗∗

(0.002) (0.002) (0.002) (0.003) (0.008)
Distance (100 km) 0.0185 −0.0041 −0.0104 −0.0032 0.0500
(0.013) (0.012) (0.013) (0.016) (0.046)
German × Distance −0.0326∗ −0.0204 0.0286∗∗ 0.0043 −0.2107∗∗∗
(0.019) (0.013) (0.014) (0.017) (0.050)
Constant 0.9156∗∗∗ 0.9605∗∗∗ 0.6684∗∗∗ 0.8401∗∗∗ 4.1500∗∗∗
(0.002) (0.010) (0.014) (0.016) (0.056)
Individual controls No Yes Yes Yes Yes
Municipality controls No Yes Yes Yes Yes
Canton FE Yes Yes Yes Yes Yes
Adjusted R2 0.003 0.108 0.125 0.057 0.124
Individuals 411,960 411,960 173,439 175,836 62,685
Municipalities 1068 1068 1065 1068 1065

Notes: Table 3 presents the estimations of Eq. (1) with OLS for 2000. Specifications are identical to Table 2.
Standard errors clustered at municipality of birth level in parentheses. ∗ p < 0.10, ∗∗ p < 0.05, ∗∗∗ p < 0.01.
Source: Own calculations based on the Swiss Census 2000, Federal Statistical Office (FSO).

The large increase in magnitude corresponds to the period where early
claiming of pension benefits becomes possible, suggesting that culture
and financial constraints interact.
The age patterns are in line with the descriptive evidence presented
in Fig. 6, while the magnitude of the cultural effects estimated for the
age group 57–64 is not far from the gap observed in Fig. 8. Evaluated
at the sample mean, the estimated effect represents a LFP difference of
2.8% in favor of German speaking individuals.25
7.3. Difference-in-differences 1970–2000
A way to test for the increase in cultural effects over time is to pool
the data for 1970 and 2000 and to use a long difference-in-differences
(DID) approach. In this context, I estimate a modified version of Eq. (1),
namely
𝑦𝑖𝑚𝑠 = 𝛼0 + 𝛼1 𝐺𝑒𝑟𝑚𝑎𝑛𝑚 × 𝑌 𝑒𝑎𝑟2000 + 𝛼2 𝐺𝑒𝑟𝑚𝑎𝑛𝑚
+ 𝛼3 𝐷𝑖𝑠𝑡𝑎𝑛𝑐𝑒𝑚 × 𝑌 𝑒𝑎𝑟2000 + 𝛼4 𝐷𝑖𝑠𝑡𝑎𝑛𝑐𝑒𝑚
+ 𝛼5 𝐺𝑒𝑟𝑚𝑎𝑛𝑚 × 𝐷𝑖𝑠𝑡𝑎𝑛𝑐𝑒𝑚 × 𝑌 𝑒𝑎𝑟2000
+ 𝛼6 𝐺𝑒𝑟𝑚𝑎𝑛𝑚 × 𝐷𝑖𝑠𝑡𝑎𝑛𝑐𝑒𝑚 + 𝛼7 𝑌 𝑒𝑎𝑟2000
+ 𝜖𝑖𝑚𝑠 (2)
where Year2000 is a dummy variable equal to one for observations col-
lected in the 2000 Census, and other variables are the same as before.26
The main parameter of interest is 𝛼 1 , which now captures the change in
the impact of cultural factors on LFP between 1970 and 2000.
Table 4 presents the estimations of Eq. (2). In addition to canton fixed
affects, all regressions now contain year fixed effects, which control for
year-specific trends at the country level. I also include canton-year fixed
effects to capture institutional changes over time, and other local fluc-
tuations.

25 26
The sample mean LFP for Romance speaking males aged between 57 and 64 Time subscripts are omitted as individuals cannot be linked across waves.
living within 30 km of the language border is 0.7167. Each individual i it thus observed only once in the sample.

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Table 4
Difference-in-differences in male LFP.

All Age 25–40 41–56 57–64

(1) (2) (3) (4) (5)

German language × Year 2000 0.0099∗∗∗ 0.0105∗∗∗ 0.0037 0.0107∗∗∗ 0.0200∗∗

(0.003) (0.003) (0.002) (0.003) (0.009)
German language (1970) 0.0025 0.0013 0.0004 0.0003 0.0024
(0.002) (0.002) (0.002) (0.003) (0.005)
Constant 0.9642∗∗∗ 0.8594∗∗∗ 0.6080∗∗∗ 0.8212∗∗∗ 2.9900∗∗∗
(0.002) (0.010) (0.016) (0.014) (0.068)
Individual controls No Yes Yes Yes Yes
Municipality controls No Yes Yes Yes Yes
Canton FE Yes Yes Yes Yes Yes
Year FE Yes Yes Yes Yes Yes
Canton × Year FE Yes Yes Yes Yes Yes
Adjusted R2 0.009 0.104 0.179 0.061 0.123
Individuals 778,125 778,125 325,971 321,234 130,920
Municipalities 1068 1068 1068 1068 1068

Notes: Table 4 presents the estimations of Eq. (2) with OLS. Specifications are identical to
Table 2. Standard errors clustered at municipality of birth level in parentheses. ∗ p < 0.10,
∗∗
p < 0.05, ∗∗∗ p < 0.01.
Source: Own calculations based on the Swiss Censuses 1970 and 2000, Federal Statistical Office
(FSO).

For clarity, only two coefficients are reported. The coefficient on
German language × Year 2000 provides the difference-in-differences be-
tween the impact of culturally shaped factors on LFP in 1970 and 2000.
The coefficient on German language (1970) gives the baseline cultural
effects from 1970.27
We can see that there are indeed large changes over time. While the
effects of culture on LFP are close to zero and not significant in 1970,
they significantly increase in 2000. However, the changes are hetero-
geneous across age groups. The language border difference in LFP is
identical for individuals under 40. For the age group 41–56, cultural ef-
fects increase by almost one percentage point. For individuals in age of
claiming early pension benefits, the change is two percentage points.
Note that while the difference-in-differences results are in line with
the original hypothesis, the data does not allow me to fully disentangle
the effects of the pension reforms from those specific to each cohort. It
could be the case that the increase in wealth between 1970 and 2000
is large enough to allow individuals to retire early, even if the pension
system had not been reformed.
7.4. Differences by age
Previous results suggest that the impact of cultural preferences is
linked to changes in financial constraints that followed the introduction
of the modern pension system. However, the age groups considered in
the regressions are large and descriptive evidence (e.g. Fig. 6) showed
smooth trends across ages. The link with the changes in pension benefit
rules is therefore not clear.
The low frequency and cross-sectional nature of the Swiss Census
does not allow for an impact evaluation around the times when the
pension reforms took place. Instead, I rely on indirect evidence. I look
more precisely at which ages the language border difference in LFP is
largest. Recall that there was no legal early retirement age in 1970, that
early claiming of 2nd pillar pension benefits was possible from age 57 in
1990, and that, additionally, 1st pillar pension benefits could be claimed
from age 64 in 2000. If there exists a relationship between financial con-
straints and cultural effects, we should observe spikes in LFP difference
at the ages when individuals become eligible for early retirement.
Fig. 9 plots the estimated language border difference coefficients (𝛼 1
from Eq. (1)) for every age in each Census wave. Each marker is the coef-
27
This coefficient is equivalent to the one in Table 2, except that year and
canton-year fixed effects now remove additional invariant unobservable factors.
ficient resulting from running a regression with the whole set of controls
but only using individuals of a given age. Each plot thus contains the
results of 41 regressions. Vertical dotted lines are added to signal an age
at which individuals become eligible for early pension benefits of some
sort.
Graph (a) for 1970 does not show any specific age trend. The differ-
ence in LFP between Romance and German speaking individuals seems
to randomly oscillate around zero, with an increasing variance for older
individuals. Graph (b) for 1990 is similar. However, the largest spike is
observed at age 57. This spike indicates that the LFP of German speak-
ing individuals of this age is significantly higher than their Romance
peers. This age also corresponds to the age at which individuals become
eligible to early pension benefits. The LFP of the two groups is again
similar after that. Graph (c) for 2000 is more jittery overall, but large
differences are visible as soon as individuals become eligible to pension
benefits. Romance speaking individuals leave the labor force earlier, es-
pecially at and around the age thresholds.
7.5. Pseudo longitudinal analysis
Cultural differences in LFP have significantly increased between
1970 and 2000, and these differences have been shown not to be just a
general trend, but to be driven by individuals whose age corresponds to
the eligibility thresholds for early pension benefits. However, two con-
cerns remain. First, previous analyses relied on comparing different in-
dividuals at different points in time. Second, positive LFP differences are
already observed for individuals below early retirement age in 2000,28
suggesting that other factors might be at play, and that the common
trend assumption needed for the difference-in-differences estimations
might not hold.
To alleviate these concerns, I construct a pseudo longitudinal sample
by only keeping individuals in the age cohorts 27–34 in 1970, 47–54 in
1990, and 57–64 in 2000. Given that only Swiss-born males are consid-
ered, the three groups should contain the same individuals over time,
minus outbound migration and deaths.29 The model I estimate is similar
28
For example model (4) in Table 3 and graph (c) from Fig. 9.
29 The age cohort 27–34 in 1970 contains 74,791 individuals, against 71,002
for the 47–54 group in 1990, and 62,685 for the 57–64 group in 2000. This rep-
resents an attrition rate of 16.19% over 30 years, which is equivalent to a annu-
alized rate of 0.59%. This is consistent with the adult mortality rate in Switzer-
land over the same period (4.5–5 per thousand, WHO Mortality Database) and
a low outbound migration.

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Table 5
Pseudo longitudinal difference-in-differences in male
LFP.

(1) (2)

German language × Year 2000 0.0249∗∗ 0.0248∗∗

(0.008) (0.008)
German language × Year 1990 0.0055 0.0051
(0.003) (0.003)
German language (1970) −0.0005 −0.0010
(0.002) (0.002)
Constant 0.9850∗∗∗ 1.3197∗∗∗
(0.003) (0.022)
Individual controls No Yes
Municipality controls No Yes
Canton FE Yes Yes
Year FE Yes Yes
Canton × Year FE Yes Yes
Adjusted R2 0.152 0.208
Individuals 208,478 208,478
Municipalities 1067 1067

Notes: Table 5 presents the estimations of an augmented

version of Eq. (2) with OLS. Specifications are identical to
Table 2 except that the sample now only includes Swiss
males belonging to the age cohorts 27–34 in 1970, 47–54
in 1990, and 57–64 in 2000. Standard errors clustered
at municipality of birth level in parentheses. ∗ p < 0.10,
∗∗
p < 0.05, ∗∗∗ p < 0.01.
Source: Own calculations based on the Swiss Censuses
1970, 1990, and 2000, Federal Statistical Office (FSO).

to Eq. (2), except that it contains additional interaction terms for 1990.
The 27–34 group from 1970 is used as a baseline, while the 47–54 group
from 1990 is used to observe potential trends in LFP difference just be-
fore reaching early retirement age. As in previous analyses, the 57–64
group from 2000 allows for the estimation of cultural differences once
individuals are in age of claiming early pension benefits.
Table 5 presents the results. The interaction terms now indicate how
the difference across language regions evolved as individuals got older.
The coefficient on German language (1970) shows that the two language
groups behaved similarly when aged 27–34. The coefficient on German
language × Year 1990 shows that these individuals still had an identical
LFP 20 years later, just before becoming eligible for early pension bene-
fits. This is reassuring as it shows that the differences already observed
before retirement age in 2000 (on other individuals) are cohort-specific
and not an age trend. Finally, the coefficient on German language × Year
2000 shows that the LFP of the two groups significantly differed once
eligible to early pension benefits, confirming the initial hypothesis.

8. Mechanisms

8.1. Pathways to retirement

Previous analyses used labor force participation as dependent vari-

Fig. 9. Language border difference, estimated coefficients by age.
Notes: Fig. 9 plots the estimated Local Border Contrast coefficients (𝛼 1 from
Eq. (1)) by age. Each marker is the coefficient resulting from running a regres-
sion with the whole set of controls but only using individuals of a given age.
Each graph therefore plots the results of 41 regressions. A coefficient above the
zero line means that German speaking individuals have a higher LFP for a given
age.
Source: Own calculations based on the Swiss Censuses 1970, 1990, and 2000,
Federal Statistical Office (FSO).
able. However, there are different pathways to (early) retirement, such
as part-time employment, unemployment benefits, and disability insur-
ance. Understanding how individuals exit the labor force is important to
ensure that the cultural effects documented previously arise from pen-
sion reforms and not from other policies.
Table 6 provides difference-in-differences estimations on several
other dependent variables available in the Swiss Census: employed (to-
tal and part-time), unemployed, retired, and other non-active. Employed
and unemployed are the two subcategories for which the variable LFP
was equal to one previously. Alternatively, retired and other non-active
are the two subcategories for which the variable LFP was equal to zero.
The other non-active category contains individuals in full-time educa-
tion, doing charity work, household work, as well as social and/or dis-
ability insurance claimants. All these states are mutually exclusive. I

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Table 6
Difference-in-differences in labor force status (males 57–64).

Dependent variable Employed Part-time empl. Unemployed Retired Other non-active

(1) (2) (3) (4) (5)

German language × Year 2000 0.0204∗∗ −0.0027 −0.0004 −0.0172∗∗ −0.0028

(0.009) (0.007) (0.003) (0.007) (0.006)
German language (1970) 0.0029 −0.0012 −0.0005 −0.0020 −0.0004
(0.005) (0.004) (0.001) (0.005) (0.002)
Constant 3.0032∗∗∗ −0.2233∗∗∗ −0.0132 −1.1260∗∗∗ −0.8640∗∗∗
(0.062) (0.024) (0.011) (0.049) (0.032)
Individual controls Yes Yes Yes Yes Yes
Municipality controls Yes Yes Yes Yes Yes
Canton FE Yes Yes Yes Yes Yes
Year FE Yes Yes Yes Yes Yes
Canton × Year FE Yes Yes Yes Yes Yes
Adjusted R2 0.132 0.012 0.012 0.062 0.083
Individuals 130,920 130,920 130,920 130,920 130,920
Municipalities 1068 1068 1068 1068 1068

Notes: Table 6 presents the estimations of Eq. (2) with OLS. Specifications are identical to Table 2 except
that the dependent variable for all models is a dummy variable equal to one if the individuals is in a given
labor market status, and equal to zero otherwise. Standard errors clustered at municipality of birth level in
parentheses. ∗ p < 0.10, ∗∗ p < 0.05, ∗∗∗ p < 0.01.
Source: Own calculations based on the Swiss Censuses 1970 and 2000, Federal Statistical Office (FSO).

also analyze part-time employed as a fifth dependent variable, which is Table 7

a subcategory of employed. Job types near the language border (2000).
We observe that the higher LFP for German speaking individuals Romance side German side RD coefficient
documented previously is entirely driven by a higher employment rate.
ISCO Mean s.e. Mean s.e. Coef. s.e.
The share of unemployed individuals is the same on both sides of the
language border.30 There are no differences in part-time employment 1 0.11 0.00 0.15 0.00 0.018 0.007
2 0.15 0.01 0.18 0.01 −0.019 0.015
either, which could be one way to increase leisure time before retiring.
3 0.18 0.00 0.18 0.00 −0.018 0.009
Model (4) shows that among inactive individuals, it is the retired cat- 4 0.06 0.00 0.06 0.00 −0.004 0.003
egory that absorbs labor force exits. The share of individuals in other 5 0.06 0.00 0.06 0.00 −0.002 0.003
non-active state is not significantly different across language regions. 6 0.06 0.01 0.04 0.01 0.012 0.015
This is reassuring as it shows that previous findings are indeed the re- 7 0.21 0.01 0.17 0.01 0.006 0.018
8 0.06 0.00 0.07 0.00 0.018 0.006
sult of working individuals retiring early, and not capturing other types
9 0.02 0.00 0.02 0.00 0.001 0.002
of transitions unrelated to the pension reforms.
Notes: Table 7 reports one-digit ISCO job types near the lan-
guage border. The sample includes employed Swiss males
8.2. Forced labor force exit or voluntary retirement?
aged between 25 and 45 born within 30 km of the language
border. The categories may not sum up to one due to miss-
Romance speakers have been shown to enjoy work less, and to wish ing observations. The RD coefficient is obtained by regressing
to retire earlier than their German peers. While it could indicate a each variable on a binary indicator equal to one for individ-
“leisure-culture”, it may also result from negative feelings about work. uals on the German side of the language border, while con-
Table 6 already showed no differences in unemployment and in part- trolling for the distance to the language border, for its inter-
time employment. However, it could be that Romance individuals hold action with the binary indicator, and for canton fixed effects.
less pleasant jobs that they want to leave as soon as they can. Standard errors clustered at municipality of birth level.
The Swiss Census provides information on job types using ISCO-08 Source: Own calculations based on the Swiss Census 2000,
Federal Statistical Office (FSO).
codes, which can be used to compare jobs near the language border.
Table 7 reports one-digit ISCO job types held by employed Swiss males
born within 30 km of the language border. Broadly speaking, the higher
(ISCO 3), and a higher share of plant and machine operators and as-
the ISCO code, the lower the skill-set required to perform the job.31
semblers (ISCO 8) right at the border on the German side. These results
I restrict the analysis to individuals aged between 25 and 45 to limit
suggest that different job types should not be driving labor force exit.
differential attrition.
While jobs are similar from the perspective of the skills needed to
Averages show that job types are very similar on either side of the
complete them, it might be that individuals still differ in how they like
language border. The RD coefficient shows a higher share of manager
them. SHARE 2004 asks individuals if they are satisfied with their cur-
jobs (ISCO 1), a lower share of technicians and associate professionals
rent job.32 Results are provided in Table 8. The sample includes Swiss
males aged at most 57 in 1985, who are the youngest individuals in
30
This finding contrasts with Eugster et al. (2017), who document differences age of fully benefiting from the reform in early claiming age for the
in unemployment duration. It is possible that the dataset used (longitudinal
unemployment register data in their case vs cross-section in this study) and the
32
choice of dependent variable (unemployment duration vs employment status) Only employed individuals answer this question, which may lead to artifi-
are causing the differences. cially high satisfaction rates if unhappy individuals left their job. However, the
31
In the one-digit classification, codes refer to the following classification: 1 sample contains about 25% of individuals who are under the age of early pension
Managers; 2 Professionals; 3 Technicians and associate professionals; 4 Clerical benefits eligibility, and another 30% of respondents who are in age of claiming
support workers; 5 Services and sales workers; 6 Skilled agricultural, forestry, early pension benefits but below the FRA. Sample bias should be reduced given
and fishery workers; 7 Craft and related trades workers; 8 Plant and machine the large size of these cohorts. Significant differences in job satisfaction, if any,
operators, and assemblers; 9 Elementary occupations. should therefore be picked up by the survey question.

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Table 8
Job satisfaction, health, and motivation for retiring.

Romance side German side

Variable Mean s.e. Mean s.e. Difference t-stat

Job satisfaction
Satisfied with current job 0.96 0.03 0.96 0.01 −0.01 −0.20
Number of observations 54 – 194 – – –
Self-perceived Health
Less than good 0.13 0.04 0.16 0.02 −0.03 −0.64
Number of observations 94 – 279 – – –
Health and work
Health won’t limit ability to work 0.85 0.05 0.86 0.03 −0.00 −0.07
Number of observations 48 – 171 – – –
Main reason for retirement?
Reached 1st pillar eligibility age 0.28 0.07 0.49 0.05 −0.20 −2.30
Company offered early retirement package 0.32 0.08 0.17 0.04 0.14 1.68
To enjoy life 0.22 0.07 0.14 0.04 0.07 0.95
To spend time with family 0.16 0.06 0.11 0.03 0.04 0.64
Reached 2nd pillar eligibility age 0.00 0.00 0.13 0.03 −0.13 −3.69
Other reason 0.05 0.04 0.09 0.03 −0.04 −0.86
Poor health 0.11 0.05 0.04 0.02 0.07 1.21
Overstaffing 0.00 0.00 0.06 0.02 −0.06 −2.46
Partner has retired 0.04 0.03 0.02 0.02 0.02 0.58
Friend/relative with poor health 0.03 0.03 0.02 0.01 0.00 0.16
Reached 3rd pillar eligibility age 0.05 0.03 0.00 0.00 0.05 1.38
Number of observations 40 – 100 – – –

Notes: Table 8 reports responses to several SHARE 2004 questions. The sample includes retired
Swiss males aged at most 57 in 1985. The first two columns report the mean and standard error
for the Romance side, while columns three and four report them for the German side. Column
five calculates the difference, while column six gives the t-statistics for the difference. Columns
may not sum up to one due to multiple possible answers.
Source: Own calculations based on SHARE data, wave 1, 2004.

2nd pillar. Contrasting responses by language region shows that 96%
of German and Romance speaking individuals agree or strongly agree
with the statement on job satisfaction.33 The two groups are therefore
not different from one another. Altogether, these results suggest that dif-
ferences in labor market difficulties across language regions are unlikely
to explain the growing gap in LFP for older workers.
A second reason for leaving the labor force before the FRA may be
poor health. Health-care quality in Switzerland is homogeneous across
cantons, and health insurance is mandatory for all individuals. Unlike
countries like the U.S., health insurance contracts are not linked to em-
ployment contracts. The decision to retire should therefore not be af-
fected by the availability (or the price) of health insurance. However,
differences in physical or mental health could arise if there are vari-
ations in the way individuals manage their health across language re-
gions. Older workers are probably more exposed than younger ones as
well.
SHARE 2004 contains a question on self-perceived health satisfac-
tion. Table 8 shows that the two language regions report identical levels,
with between around 13 and 16% of individuals dissatisfied.34 A more
specific question asks working individuals whether they are afraid that
health may limit their ability to work until regular retirement. Again,
the two groups are identical in this respect.35 Overall, health differences
across language regions do not seem to be a key factor driving the gap
in LFP.
33
Other possible responses were: Disagree, Strongly disagree, and Do not
know.
34
The self-perceived health satisfaction (European version) allows individuals
to choose an answer from: Very good, Good, Fair, Bad, and Very bad. Individuals
can also refuse to answer the question but no one skipped it. A standard way
to compare health satisfaction is then to consider the share of individuals who
report a health satisfaction lower than good.
35
Possible answers are: Yes, No, I do not know. Again, individuals could refuse
the question but no one skipped it.
SHARE 2004 also offers a more direct question on the main reason
for retiring. Individuals can select as many answers as they wish among
eleven possibilities: Reached 1st pillar eligibility age, reached 2nd pillar
eligibility age, reached 3rd pillar early eligibility age, overstaffing, poor
health, friend/relative with poor health, partner has retired, to spend
time with family, to enjoy life, and gother reason. Table 8 summarizes
the responses. Note that 85% of the respondents selected only one an-
swer, while the remaining 15% chose between two and four.
Despite the small sample size, some general trends can be observed.
Reaching pension eligibility age is the most common reason for retir-
ing for German speakers, as 49% of them selected it. There is a large
difference across language regions as only 28% of Romance individu-
als selected it. This probably reflects the difference in LFP for workers
close to the FRA. The first most selected reason on the Romance side and
the second one on the German side is the availability of an early retire-
ment package from the employer. A sizable difference across regions is
observable again, as 32% of Romance individuals selected this reason,
against only 17% of Germans. This could suggest a different behavior
from companies on either side of the language border. Unfortunately,
no details are given on the exact form of this package, which can range
between a “free” full salary paid for the time remaining until FRA, to
much less generous benefits simply topping up early pension benefits.
It is therefore difficult to estimate differences in employers’ generos-
ity across the language border. In addition, this reason does not tell us
whether an early retirement package was available but not taken. It is
likely that by reducing the early retirement age, reforms in the pension
system also lowered the cost for companies to offer retirement packages.
The extend to which cultural differences affect employers’ behavior as
well remains unclear.
Enjoying life is the third most selected reason on both side of the
language border, with 22% of Romance individuals and 15% of Ger-
mans selecting it. Spending time with family comes fourth for Romance,
and fifth for Germans, behind 2nd pillar eligibility age. None of the dif-
ferences in responses is statistically significant but these figures are in

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Table 9
Difference-in-differences in female LFP.

All Age 25–40 41–56 57–62

(1) (2) (3) (4) (5)

German language × Year 2000 0.0098 0.0081 −0.0014 0.0137 0.0158

(0.009) (0.009) (0.010) (0.011) (0.016)
German language (1970) −0.0129 −0.0103 −0.0130 −0.0124 0.0103
(0.010) (0.008) (0.008) (0.010) (0.012)
Constant 0.4130∗∗∗ 0.5553∗∗∗ 0.4429∗∗∗ 0.7574∗∗∗ 2.2530∗∗∗
(0.008) (0.017) (0.022) (0.021) (0.070)
Individual controls No Yes Yes Yes Yes
Municipality controls No Yes Yes Yes Yes
Canton FE Yes Yes Yes Yes Yes
Year FE Yes Yes Yes Yes Yes
Canton × Year FE Yes Yes Yes Yes Yes
Adjusted R2 0.130 0.226 0.281 0.200 0.129
Individuals 718,817 718,817 321,245 324,201 90,122
Municipalities 1068 1068 1068 1068 1067

Notes: Table 9 presents the estimations of Eq. (2) with OLS. Specifications are identical to Table 2
except that the sample now only includes Swiss-born females. Standard errors clustered at mu-
nicipality of birth level in parentheses. ∗ p < 0.10, ∗∗ p < 0.05, ∗∗∗ p < 0.01.
Source: Own calculations based on the Swiss Censuses 1970 and 2000, Federal Statistical Office
(FSO).

line with the differences in attitudes towards work and retirement doc-
umented in Section 5.1.
8.3. Complementarities in retirement
Retiring early is great, but doing it surrounded by people that you
like is better. Complementarities in retirement might therefore explain
why Romance individuals choose to leave the labor force early. The
Swiss Census does not contain information in individuals’ acquain-
tances. Instead, I look at the labor force participation of females, and of
males in couples. Language border differences in LFP for these groups
could indicate that differences in complementarities in retirement are
partly driving the results.
Table 9 presents the results of a difference-in-differences estimation
on female LFP. Unlike males, Romance and German speaking females
show similar levels LFP across all ages and over time. However, the
absence of a statistically significant difference may be due to the large
variance in the data. The coefficients suggest that Romance females may
have a lower LFP, and that this gap has increased over time, but the stan-
dard errors are very large. This is not enough to conclude on the effect
of complementarities in explaining the difference in early retirement.
Analyzing the LFP of couples raises the issue of potentially selected
sub-samples. However, descriptive statistics seems to indicate that there
are no large differences across language regions. 82.5% of Romance
males aged between 57 and 64 in 2000 report being part of a cou-
ple (married or not), against 84.7% of their German speaking peers.36
Males are on average 3.6 years older than their partners on both sides
of the language border in 2000.37 A way to assess complementarities is
therefore to compare LFP across individuals with different relationship
situations.
Table 10 presents the language border difference in LFP for males
aged between 57 and 64 in 2000. Model (1) reports again the full sam-
ple estimation.38 Models (2) only considers the sub-sample of males who
live in the same household as their partner. Models (3) and (4) divide
this sub-sample further by employment status of their partner. Results
suggest that language border differences are slightly greater for individ-
uals with a partner at a ten percent significance level.39 Among them,
LFP differences seem larger for individuals whose partner is not active
in the labor force, compared to those whose partner is still active but
the difference is not statistically significant.40 These results are with
the findings of Lalive and Parrotta (2017), who show that partner pen-
sion eligibility has an effect on female LFP but not on male LFP. While
complementarities may have a role in explaining retirement decision,
they do not seem to be a key driving force of the cultural differences
observed.
9. Robustness checks
9.1. Religion
Religion is the biggest difference in observed characteristics across
the two language groups. On the Romance side, 24% of individuals are
Protestant, and 61% are Catholic. This compares to 48% and 32% re-
spectively on the German side. An interesting question is then whether
it is language or religion that generates different cultural groups. As
the Swiss Census contains religious affiliation at the individual level, it
is possible to control for it and study LFP differences across language
groups within the same religious affiliation.
Table 11 presents again the estimated differences in LFP at the lan-
guage border for 1970 and 2000. Models (1) and (3) are the same as
those presented earlier, while models (2) and (4) add a control for re-
ligion.41 Including religion in the models does not affect the results.
The estimated LFP difference at the language border for 1970 decreases
from 0.0026 to 0.0020 and is still statistically non-different from zero.
For 2000, it decreases from 0.0236 to 0.0223 but remains highly sta-
tistically significant. These findings suggest that it is language and not
religion that primarily shapes cultural groups in Switzerland, which in
turn affect LFP.

36 39
These fractions were 86.7 for Romance and 90.0 for Germans in 1970. 8.2% A Generalized Hausmann test gives a Chi2 value of 2.93, with a p-value of
are same sex couples in 2000 (10.4% for Romance, 7.6% for Germans), against 0.0871.
40
5.5% in 1970 (5.8% for Romance, 5.5% for Germans). A Generalized Hausmann test gives a Chi2 value of 0.17, with a p-value of
37
This difference in 1970 was 2.9 for Romance individuals, against 3.1 for 0.6785.
41
their German peers. Model (1) corresponds to model (5) in Table 2, while model (3) corresponds
38
It corresponds to model (5) presented in Table 3. to model (5) in Table 3.

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Table 10
LFP by relationship status (males 57–64, 2000).

All With partner Active partner Inactive partner

(1) (2) (3) (4)

German language 0.0236∗∗∗ 0.0286∗∗∗ 0.0272∗∗∗ 0.0305∗∗

(0.008) (0.009) (0.010) (0.013)
Distance (100 km) 0.0500 0.0425 0.0315 0.0367
(0.046) (0.050) (0.070) (0.069)
German × Distance −0.2107∗∗∗ −0.1956∗∗∗ −0.1720∗∗ −0.1804∗∗
(0.050) (0.055) (0.074) (0.080)
Constant 4.1500∗∗∗ 4.5015∗∗∗ 3.2235∗∗∗ 5.0143∗∗∗
(0.056) (0.075) (0.095) (0.097)
Individual controls Yes Yes Yes Yes
Municipality controls Yes Yes Yes Yes
Canton FE Yes Yes Yes Yes
Adjusted R2 0.124 0.135 0.080 0.144
Individuals 62,685 42,463 21,396 21,067
Municipalities 1065 1061 1038 1041

Notes: Table 10 presents the estimations of Eq. (1) with OLS for 2000. Specifications are identical to
Table 2. Standard errors clustered at municipality of birth level in parentheses. ∗ p < 0.10, ∗∗ p < 0.05,
∗∗∗
p < 0.01.
Source: Own calculations based on the Swiss Census 2000, Federal Statistical Office (FSO).

Table 11 Table 12
Difference-in-differences in LFP within religion (males 57–64). LFP by bandwidth (males 57–64, 2000).

1970 2000 Bandwidth 20 km 30 km 40 km 50 km

(1) (2) (3) (4)
(1) (2) (3) (4)
German language 0.0227∗∗∗ 0.0236∗∗∗ 0.0199∗∗∗ 0.0230∗∗∗
German language 0.0026 0.0020 0.0236∗∗∗ 0.0223∗∗∗
(0.008) (0.008) (0.007) (0.007)
(0.005) (0.005) (0.008) (0.008)
Distance (100 km) 0.1266∗ 0.0500 0.0730∗∗ 0.0609∗
Distance (100 km) −0.0111 −0.0115 0.0500 0.0483
(0.065) (0.046) (0.034) (0.033)
(0.035) (0.035) (0.046) (0.046)
German × Distance −0.3317∗∗∗ −0.2107∗∗∗ −0.1883∗∗∗ −0.1622∗∗∗
German × Distance −0.0305 −0.0299 −0.2107∗∗∗ −0.2106∗∗∗
(0.077) (0.050) (0.038) (0.038)
(0.038) (0.038) (0.050) (0.051)
Constant 4.1018∗∗∗ 4.1500∗∗∗ 4.1991∗∗∗ 4.1424∗∗∗
Constant 1.4997∗∗∗ 1.4968∗∗∗ 4.1500∗∗∗ 4.1569∗∗∗
(0.072) (0.056) (0.049) (0.044)
(0.112) (0.113) (0.056) (0.057)
Individual controls Yes Yes Yes Yes
Individual controls Yes Yes Yes Yes
Municipality controls Yes Yes Yes Yes
Municipality controls Yes Yes Yes Yes
Canton FE Yes Yes Yes Yes
Religion control No Yes No Yes
Adjusted R2 0.121 0.124 0.127 0.126
Canton FE Yes Yes Yes Yes
Individuals 40,307 62,685 79,865 99,414
Adjusted R2 0.056 0.056 0.124 0.125
Municipalities 735 1065 1387 1688
Individuals 68,235 68,235 62,685 62,685
Municipalities 1066 1066 1065 1065 Notes: Table 12 presents the estimations of Eq. (1) with OLS for 2000. Spec-
ifications are identical to Table 2 except that the sample now includes Swiss
Notes: Table 11 presents the estimations of Eq. (1) with OLS for 1970 and
males aged 57–64 born in a municipality located within n kilometers of the
2000. Specifications are identical to Table 2 except that religion control
language border, where n is the chosen bandwidth. Standard errors clustered
now includes religious affiliation at the individual level. Standard errors
at municipality of birth level in parentheses. ∗ p < 0.10, ∗∗ p < 0.05, ∗∗∗ p < 0.01.
clustered at municipality of birth level in parentheses. ∗ p < 0.10, ∗∗ p < 0.05,
Source: Own calculations based on the Swiss Census 2000, Federal Statistical
∗∗∗
p < 0.01.
Office (FSO).
Source: Own calculations based on the Swiss Censuses 1970 and 2000, Fed-
eral Statistical Office (FSO).

Romance speaking peers. This effect is not affected by the choice of

9.2. Bandwidth and language majority
This section discusses two additional robustness checks. First, I esti-
mate four models with different bandwidths, varying from 20 to 50 km
on both sides of the language border, to show that bandwidth choice
does not drive the results.42 Second, I apply a stricter language majority
rule than the baseline 50% case to allocate communes into each lan-
guage region.
Table 12 presents the results for male LFP in 2000 when varying
the bandwidth. I focus on the age group 57–64. The coefficients on
the dummy variable German language range between 0.020 and 0.024,
meaning that individuals living on the German side of the language
border have a LFP higher by about two percentage points than their
42
See Imbens and Kalyanaraman (2012) for a formal discussion of optimal
bandwidth choice for RDD.
bandwidth.
Table 13 presents the results for male LFP in 2000 when changing
the language majority rule to attribute communes into language regions.
Model (1) reports the same estimation as was done previously.43 Models
(2) to (4) restrict the sample to communes that have a share of German
speakers greater than s on the German language region, and lower than
100 − 𝑠 on the Romance language region. Gradually increasing s from 50
to 65 therefore removes more “mixed” communes from the sample.44
As before, I focus on the age group 54–67. The coefficient on German
language increases first before slowly decreasing. However, differences
43
It corresponds to model (5) presented in Table 3.
44 Note that a drawback of restricting the sample in this way is that it is likely
to remove communes that are the closest to each others on the two sides of the
language border. As I control for distance to the language border, the coeffi-
cient on German language relies more heavily on (linear) extrapolation of values
further away from the language border as the language majority rule becomes
stricter

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affect individuals’ financial constraints need to pay attention to cultural primarily funded by the European Commission through FP5 (QLK6-CT-2001-
00360), FP6 (SHARE-I3: RII-CT-2006-062193, COMPARE: CIT5-CT-2005-028857,
factors. Reforms may generate inequalities driven by differences in lo-
SHARELIFE: CIT4-CT-2006-028812) and FP7 (SHARE-PREP: No211909, SHARE-
cal preferences. Additionally, pilot studies of reforms may not produce LEAP: No227822, SHARE M4: No261982). Additional funding from the Ger-
valid results for other places. man Ministry of Education and Research, the Max Planck Society for the Ad-

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ARTICLE IN PRESS
L. Cottier
vancement of Science, the U.S. National Institute on Aging (U01_AG09740-
13S2, P01_AG005842, P01_AG08291, P30_AG12815, R21_AG025169, Y1-AG-4553-
01, IAG_BSR06-11, OGHA_04-064, HHSN271201300071C) and from various national
funding sources is gratefully acknowledged see, http://www.share-project.org.
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