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Retirement Decisions of Older Czech Male Workers

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  • Kamil Galuscak

Abstract

I analyze the effects associated with the introduction of the earnings test on older Czech males' labor supply in 1996. Using data from the Labor Force Survey, I apply a difference-in-differences estimator to measure the effect of the policy change in the Czech pension scheme using a sample of retired males aged 60 to 64 in 1995 and 1996. I use an age group not affected by the earnings test to separate the effect associated with the implementation of the earnings test. Correcting for sample selection, results indicate that the earnings test decreases the labor supply of retired males affected by the policy change. Their participation reduces by 7.7 percentage points, while hours of work decline by 4.8 hours per week. The response to the earnings test is moderately lower after controlling for the announcement of the policy change. The pecuniary value of the labor supply drop was negligible for the state in 1996, but increased significantly between 1996 and 2000.

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Bibliographic Info

Paper provided by The Center for Economic Research and Graduate Education - Economic Institute, Prague in its series CERGE-EI Working Papers with number wp190.

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Date of creation: Nov 2001
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Handle: RePEc:cer:papers:wp190

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Keywords: labor market policy; earnings test; labor supply; retirement;

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References

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  1. Ruhm, Christopher J, 1990. "Bridge Jobs and Partial Retirement," Journal of Labor Economics, University of Chicago Press, vol. 8(4), pages 482-501, October.
  2. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
  3. Burtless, Gary & Moffitt, Robert A, 1985. "The Joint Choice of Retirement Age and Postretirement Hours of Work," Journal of Labor Economics, University of Chicago Press, vol. 3(2), pages 209-36, April.
  4. Leora Friedberg, 1999. "The Labor Supply Effects of the Social Security Earnings Test," NBER Working Papers 7200, National Bureau of Economic Research, Inc.
  5. Blau, David M, 1998. "Labor Force Dynamics of Older Married Couples," Journal of Labor Economics, University of Chicago Press, vol. 16(3), pages 595-629, July.
  6. Heckman, James J, 1979. "Sample Selection Bias as a Specification Error," Econometrica, Econometric Society, vol. 47(1), pages 153-61, January.
  7. Edward Whitehouse, 1990. "The abolition of the pensions 'earnings rule'," Fiscal Studies, Institute for Fiscal Studies, vol. 11(3), pages 55-70, August.
  8. Baker, Michael & Benjamin, Dwayne, 1999. "How do retirement tests affect the labour supply of older men?," Journal of Public Economics, Elsevier, vol. 71(1), pages 27-51, January.
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Cited by:
  1. David Kocourek & Filip Pertold, 2009. "Impact of Early Retirement Incentives on Labour Market Participation: Evidence from a Parametric Change in the Czech Republic," Working Papers 2009/7, Czech National Bank, Research Department.

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