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Joint Labour Supply Dynamics of Older Couples

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  • Michaud, P.C.

    (Tilburg University, Center for Economic Research)

Abstract

This paper studies the labour force participation dynamics of older couples in the United States.Longitudinal data from the five available waves of the Health and Retirement Study (HRS) is used to investigate if the dynamics introduced by considering both spouses' behavior provide additional information in trying to fit observed participation sequences.The paper uses a bivariate dynamic binary choice model with unobserved heterogeneity and serial correlation to disentangle the many sources of dynamics and correlation in a couple's decision making.First, strong true state-dependence is found and results in a bunching of participation and non-participation sequences.Cross-spouse state-dependence is also found which points to indirect effects of social security and pension incentives through complementarity in leisure.Second, the Spouse Allowance program is found to have predicted effects on participation of the couple and these effects are statistically significant.A simulation exercise presents evidence that the elimination of the spouse allowance can raise participation of wives at age 62 by more than the decrease in participation of husbands at age 65.

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Bibliographic Info

Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2003-69.

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Date of creation: 2003
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Handle: RePEc:dgr:kubcen:200369

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Web page: http://center.uvt.nl

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Keywords: labour supply; retirement; panel data; older workers;

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References

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  1. Pozzebon, Silvana & Mitchell, Olivia S, 1989. "Married Women's Retirement Behavior," Journal of Population Economics, Springer, vol. 2(1), pages 39-53.
  2. Michael D. Hurd, 1988. "The Joint Retirement Decision of Husbands and Wives," NBER Working Papers 2803, National Bureau of Economic Research, Inc.
  3. Michael Baker, 2003. "The Retirement Behavior of Married Couples: Evidence From The Spouse's Allowance," Working Papers 993, University of California, Davis, Department of Economics.
  4. Train,Kenneth E., 2009. "Discrete Choice Methods with Simulation," Cambridge Books, Cambridge University Press, number 9780521766555.
  5. Alan L. Gustman & Thomas L. Steinmeier, 2001. "Social Security, Pensions and Retirement Behavior Within the Family," Working Papers wp018, University of Michigan, Michigan Retirement Research Center.
  6. Coile Courtney, 2004. "Retirement Incentives and Couples' Retirement Decisions," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 4(1), pages 1-30, July.
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  9. Michael D. Hurd, 1993. "The Effect of Labor Market Rigidities on the Labor Force Behavior of Older Workers," NBER Working Papers 4462, National Bureau of Economic Research, Inc.
  10. Jiménez-Martín, Sergi & Labeaga, José M. & Martínez Granado, Maite, 1999. "Health status and retirement decisions for older European couples," IRISS Working Paper Series 1999-01, IRISS at CEPS/INSTEAD.
  11. James P. Smith, 1999. "Healthy Bodies and Thick Wallets: The Dual Relation between Health and Economic Status," Journal of Economic Perspectives, American Economic Association, vol. 13(2), pages 145-166, Spring.
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  13. Gustman, Alan L & Steinmeier, Thomas L, 2000. "Retirement in Dual-Career Families: A Structural Model," Journal of Labor Economics, University of Chicago Press, vol. 18(3), pages 503-45, July.
  14. Dean R. Hyslop, 1999. "State Dependence, Serial Correlation and Heterogeneity in Intertemporal Labor Force Participation of Married Women," Econometrica, Econometric Society, vol. 67(6), pages 1255-1294, November.
  15. Blau, David M., 1997. "Social security and the labor supply of older married couples," Labour Economics, Elsevier, vol. 4(4), pages 373-418, December.
  16. Elie Tamer, 2003. "Incomplete Simultaneous Discrete Response Model with Multiple Equilibria," Review of Economic Studies, Wiley Blackwell, vol. 70(1), pages 147-165, January.
  17. Chamberlain, Gary, 1984. "Panel data," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 22, pages 1247-1318 Elsevier.
  18. Lumsdaine, Robin L. & Mitchell, Olivia S., 1999. "New developments in the economic analysis of retirement," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 49, pages 3261-3307 Elsevier.
  19. Vella, F. & Verbeek, M.J.C.M., 1999. "Two-step estimation of panel data models with censored endogenous variables and selection bias," Open Access publications from Tilburg University urn:nbn:nl:ui:12-80344, Tilburg University.
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Citations

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Cited by:
  1. Anne C. Gielen, 2009. "Working hours flexibility and older workers' labor supply," Oxford Economic Papers, Oxford University Press, vol. 61(2), pages 240-274, April.
  2. Ted Aranki & Corrado Macchiarelli, 2013. "Employment duration and shifts into retirement in the EU," LSE Research Online Documents on Economics 53190, London School of Economics and Political Science, LSE Library.
  3. Alan Gustman & Thomas Steinmeier, 2008. "How Does Modeling of Retirement Decisions at the Family Level Affect Estimates of the Impact of Social Security Policies on Retirement?," Working Papers wp179, University of Michigan, Michigan Retirement Research Center.
  4. García-Gómeza, P & Jones, A.M & Rice, N, 2008. "Health effects on labour market exits and entries," Health, Econometrics and Data Group (HEDG) Working Papers 08/03, HEDG, c/o Department of Economics, University of York.
  5. Michaud, P.C. & Vermeulen, F.M.P., 2004. "A Collective Retirement Model: Identification and Estimation in the Presence of Externalities," Discussion Paper 2004-75, Tilburg University, Center for Economic Research.
  6. Nigel Rice & Jennifer Roberts & Andrew M. Jones, 2007. "Sick of work or too sick to work? Evidence on health shocks and early retirement from the BHPS," Working Papers 2007002, The University of Sheffield, Department of Economics, revised Jan 2007.
  7. Alan L. Gustman & Thomas Steinmeier, 2009. "Integrating Retirement Models," NBER Working Papers 15607, National Bureau of Economic Research, Inc.
  8. Hospido, Laura & Zamarro, Gema, 2014. "Retirement Patterns of Couples in Europe," IZA Discussion Papers 7926, Institute for the Study of Labor (IZA).
  9. Danilo Cavapozzi, 2008. "Health and Labor Supply Dynamics of Older Married Workers," "Marco Fanno" Working Papers 0073, Dipartimento di Scienze Economiche "Marco Fanno".
  10. Diana Warren, 2013. "Retirement Decisions of Couples: The Impact of Spousal Characteristics and Preferences on the Timing of Retirement," Melbourne Institute Working Paper Series wp2013n41, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
  11. Jones, Andrew M. & Rice, Nigel & Roberts, Jennifer, 2010. "Sick of work or too sick to work? Evidence on self-reported health shocks and early retirement from the BHPS," Economic Modelling, Elsevier, vol. 27(4), pages 866-880, July.
  12. Zhiyang Jia, 2005. "Spousal Influence on Early Retirement Behavior," Discussion Papers 406, Research Department of Statistics Norway.

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