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The Importance of Financial Incentives on Retirement Choices

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Author Info
Michele Belloni () (CeRP, Collegio Carlo Alberto)
Rob Alessie () (Utrecht University, and Netspar)

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Abstract

This study exploits a new dataset in order to quantify the effect of financial incentives on retirement choices. This dataset contains for the first time in Italy information on seniority. In accordance with the general finding in Gruber and Wise (2004), we find that financial incentives have an effect on retirement. The effect goes in the expected direction; when employees become eligible for pension benefits the change in financial incentives they experience is so high that their retirement probability increases in a sizable way. We also find that the procedure to impute seniority used in previous studies leads to a sizable measurement error. Due to this measurement error, the key parameters of the model are inconsistently estimated. Our sensitivity analysis suggests that the lack of appropriate information on seniority is an important reason for the unclear evidence so far obtained in retirement studies for Italy.

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Publisher Info
Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 08-052/3.

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Date of creation: 22 May 2008
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Handle: RePEc:dgr:uvatin:20080052

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Web page: http://www.tinbergen.nl/

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Related research
Keywords: retirement social security wealth seniority unobserved heterogeneity

Find related papers by JEL classification:
J2 - Labor and Demographic Economics - - Demand and Supply of Labor

This paper has been announced in the following NEP Reports:

References listed on IDEAS
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  1. Raffaele Miniaci, 1998. "Microeconometric Analysis of the Retirement Decision: Italy," OECD Economics Department Working Papers 205, OECD Economics Department. [Downloadable!]
  2. Randall K. Filer & Marjorie Honig, 2005. "Endogenous Pensions and Retirement Behavior," Hunter College Department of Economics Working Papers 410, Hunter College: Department of Economics. [Downloadable!]
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  3. Agar Brugiavini & Franco Peracchi, 2003. "Social Security Wealth and Retirement Decisions in Italy," LABOUR, CEIS, Fondazione Giacomo Brodolini and Blackwell Publishing Ltd, vol. 17(SpecialIs), pages 79-114, 08. [Downloadable!] (restricted)
    Other versions:
  4. Hans Bloemen, 2008. "Private Wealth and Job Exit at Older Age: a Random Effects Model," Tinbergen Institute Discussion Papers 08-025/3, Tinbergen Institute. [Downloadable!]
    Other versions:
  5. Stock, James H & Wise, David A, 1990. "Pensions, the Option Value of Work, and Retirement," Econometrica, Econometric Society, vol. 58(5), pages 1151-80, September. [Downloadable!] (restricted)
    Other versions:
  6. Courtney Coile & Jonathan Gruber, 2000. "Social Security Incentives for Retirement," NBER Working Papers 7651, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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This page was last updated on 2008-8-27.


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