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Interdependent durations in joint retirement

Author

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  • Bo E. Honoré
  • Áureo de Paula
Abstract
In this paper we specify and use a new duration model to study joint retirement in married couples using the Health and Retirement Study. Whereas conventionally used models cannot account for joint retirement, our model admits joint retirement with positive probability, allows for simultaneity and nests the traditional proportional hazards model. In contrast to other statistical models for simultaneous durations, it is based on Nash bargaining and it is therefore interpretable in terms of economic behaviour. We provide a discussion of relevant identifying variation and estimate our model using indirect inference. The main empirical finding is that the simultaneity seems economically important. In our preferred specification the indirect utility associated with being retired increases by approximately 10% if one's spouse is already retired. By comparison, a defined benefit pension plan increases indirect utility by 20-30%. The estimated model also predicts that the indirect effect of a change in husbands' pension plan on wives' retirement dates is about 10% of the direct effect on the husbands.

Suggested Citation

  • Bo E. Honoré & Áureo de Paula, 2013. "Interdependent durations in joint retirement," CeMMAP working papers 05/13, Institute for Fiscal Studies.
    • Handle: RePEc:azt:cemmap:05/13
    DOI: 10.1920/wp.cem.2013.0513
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    References listed on IDEAS

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    Cited by:

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    2. Cetin, Sefane & Jousten, Alain, 2022. "Retirement Decision of Belgian Couples and the Impact of the Social Security System," LIDAM Discussion Papers CORE 2022024, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    3. Håkan Selin, 2017. "What happens to the husband’s retirement decision when the wife’s retirement incentives change?," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 24(3), pages 432-458, June.
    4. Blundell, R. & French, E. & Tetlow, G., 2016. "Retirement Incentives and Labor Supply," Handbook of the Economics of Population Aging, in: Piggott, John & Woodland, Alan (ed.), Handbook of the Economics of Population Aging, edition 1, volume 1, chapter 0, pages 457-566, Elsevier.
    5. Pérez, Carlos & Martín-Román, Ángel & Moral, Alfonso, 2020. "Two decades of the complementary leisure effect in Spain," The Journal of the Economics of Ageing, Elsevier, vol. 15(C).
    6. Jan Ondrich & Alexander Falevich, 2016. "The Great Recession, Housing Wealth, and the Retirement Decisions of Older Workers," Public Finance Review, , vol. 44(1), pages 109-131, January.

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    More about this item

    JEL classification:

    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies
    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables

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