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. 2020 May:173:386-401.
doi: 10.1016/j.jebo.2019.07.013. Epub 2019 Jul 29.

Understanding Joint Retirement

Pierre-Carl Michaud  1 , Arthur Van Soest  2 , Luc Bissonnette  3
Affiliations

Understanding Joint Retirement

Pierre-Carl Michaud et al. J Econ Behav Organ. 2020 May.

Abstract

Evidence from different sources shows that spouses' retirement decisions are correlated. Retirement policies affecting individuals in couples are therefore also likely to affect behavior of their spouses. It is therefore important to account for joint features in modeling retirement. This paper studies a structural collective model of labor supply and retirement of both partners in a couple with interdependent preferences, imperfect knowledge of preferences of the spouse, and subjective expectations about the future. We propose a novel method to estimate preferences and the intra-household bargaining process, which relies on stated preferences data collected in the Health and Retirement Study. Respondents were asked to choose between hypothetical retirement trajectories describing the retirement ages and replacement rates of both spouses from three perspectives: considering their own preferences only, the preferences of their spouse only, or the most likely decision for the household. With these data, all model parameters are identified and potential sources of joint retirement can be disentangled. Our results suggest that males misperceive their wives' preferences, overestimating their disutility of work. Our estimates correct for this. We find strong positive correlations between preferences for joint leisure (leisure complementarity) of the two partners. Counterfactual simulations with stylized retirement paths suggest that the leisure complementarities explain a substantial part of joint retirement, much more than correlation in unobserved heterogeneity or potential wage rates.

Keywords: C81; Collective models; D13; Identification; J26; Leisure complementarity; Stated choices.

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Figures

Figure 1:
Figure 1:
Screen Shot of Stated-preference Scenario
Figure 2:
Figure 2:
Simulated Distribution of Retirement Ages, Baseline Model (Contour Plot of the Density; lighter lines indicate higher density)
Figure 3:
Figure 3:
Simulated Retirement Ages and Expected Retirement Ages in HRS
Figure 4:
Figure 4:
Distribution of Simulated Distance to Retirement Husbands and Wives (Contour Plot of the Density; lighter lines mean higher density); Shaded area represents retirement ages at most one 1 year apart.
Figure 5:
Figure 5:
Simulated Distributions of Difference between Timing of Retirement of Husband and Wife.
See this image and copyright information in PMC

References

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