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Understanding Joint Retirement

Author

Listed:
  • Pierre-Carl Michaud
  • Arthur van Soest
  • Luc Bissonnette
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. We find that males misperceive their wives' preferences, overestimating their disutility of work. Our estimates correct for this bias. They suggest that correlation in unobserved heterogeneity components of the partners' marginal utility of leisure explains a large share of joint retirement decisions. We also find significant positive complementarities in leisure, but this explains a much smaller part of joint retirement.

Suggested Citation

  • Pierre-Carl Michaud & Arthur van Soest & Luc Bissonnette, 2018. "Understanding Joint Retirement," CIRANO Working Papers 2018s-31, CIRANO.
    • Handle: RePEc:cir:cirwor:2018s-31
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    References listed on IDEAS

    as
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    3. Vandenberghe, Vincent, 2021. "Work Beyond the Age of 50. What Role for Mental v.s. Physical Health?," GLO Discussion Paper Series 796, Global Labor Organization (GLO).
    4. Bonsang, Eric & Costa-Font, Joan, 2020. "Behavioral regularities in old age planning," Journal of Economic Behavior & Organization, Elsevier, vol. 173(C), pages 297-300.
    5. Sefane Cetin, 2021. "Joint Retirement: Evidence on the Heterogeneity of Spousal Effects," LIDAM Discussion Papers IRES 2021031, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
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    7. Vincent Vandenberghe, 2021. "Work beyond the age of 50. What role for mental versus physical health?," LABOUR, CEIS, vol. 35(3), pages 311-347, September.
    8. Bonekamp, Johan & van Soest, Arthur, 2022. "Evidence of behavioural life-cycle features in spending patterns after retirement," The Journal of the Economics of Ageing, Elsevier, vol. 23(C).
    9. Boto-García, David & Mariel, Petr & Baños-Pino, José Francisco, 2023. "Intra-household bargaining for a joint vacation," Journal of choice modelling, Elsevier, vol. 47(C).
    10. Nagore García, Amparo & van Soest, Arthur, 2022. "Joint retirement behaviour and pension reform in the Netherlands," The Journal of the Economics of Ageing, Elsevier, vol. 23(C).
    11. Merkurieva, Irina, 2023. "Retirement coordination and leisure complementarity," Labour Economics, Elsevier, vol. 85(C).
    12. Mongoljin Batsaikhan & Mette Goertz & John Kennes & Ran Sun Lyng & Daniel Monte & Norovsambuu Tumennasan, 2021. "Discrimination and Daycare Choice: Evidence from a Randomized Survey," CEBI working paper series 19-14, University of Copenhagen. Department of Economics. The Center for Economic Behavior and Inequality (CEBI).
    13. Alonso-García, Jennifer & Bateman, Hazel & Bonekamp, Johan & van Soest, Arthur & Stevens, Ralph, 2022. "Saving preferences after retirement," Journal of Economic Behavior & Organization, Elsevier, vol. 198(C), pages 409-433.
    14. Vincent VANDENBERGHE, 2021. "Health, cognition and work capacity beyond the age of 50: International evidence on the extensive and intensive margins of work," International Labour Review, International Labour Organization, vol. 160(2), pages 271-310, June.
    15. Matthew Gnagey & Therese Grijalva & Rong Rong, 2020. "Spousal influence and assortative mating on time preferences: a field experiment in the USA," Review of Economics of the Household, Springer, vol. 18(2), pages 461-512, June.
    16. Mongoljin Batsaikhan & Mette Gørtz & John Kennes & Ran Sun Lyng & Daniel Monte & Norovsambuu Tumennasan, 2019. "Daycare Choice and Ethnic Diversity: Evidence from a Randomized Survey," Economics Working Papers 2019-02, Department of Economics and Business Economics, Aarhus University.
    17. Manuel Ventura-Marco & Carlos Vidal-Meliá & Juan Manuel Pérez-Salamero González, 2022. "Life care annuities to help couples cope with the cost of long-term care," Documentos de Trabajo del ICAE 2022-03, Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico.
    18. Ralph Stevens & Jennifer Alonso Garcia & Hazel Bateman & Arthur van Soest & Johan Bonekamp, 2022. "Saving preferences after retirement," ULB Institutional Repository 2013/342267, ULB -- Universite Libre de Bruxelles.
    19. Ventura-Marco, Manuel & Vidal-Meliá, Carlos & Pérez-Salamero González, Juan Manuel, 2023. "Joint life care annuities to help retired couples to finance the cost of long-term care," Insurance: Mathematics and Economics, Elsevier, vol. 113(C), pages 122-139.

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    More about this item

    Keywords

    Collective models; Leisure complementarity; Stated choices; Identification;
    All these keywords.

    JEL classification:

    • D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access

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