Advanced Search
MyIDEAS: Login to save this paper or follow this series

Retirement Choices in Italy: What an Option Value Model tells us

Contents:

Author Info

  • Michele Belloni

    (CeRP, Collegio Carlo Alberto, Italy)

  • Rob Alessie

    (University of Groningen, Netspar, the Netherlands)

Abstract

Using Italian data, we estimate an option value model to quantify the effectof financial incentives on retirement choices. As far as we know, this isthe first empirical study to estimate the conditional multiple-years modelput forward by Stock and Wise (1990). This implies that we account fordynamic self-selection bias. We also present an extended version of thismodel in which the marginal value of leisure is random.The models yield plausible estimates of the preference parameters. Dynamicself-selection results in a considerable downward bias in the estimate of themarginal utility of leisure. We perform a simulation study to gauge theeffects of a dramatic pension reform. Underestimation of the value of leisuretranslates into sizeable over-prediction of the impact of reform. For thefemale sample, the model is able to predict almost perfectly the age-specifichazard rates. For the male sample, we obtain a good fit. Results for malesshould, however, be interpreted with caution since we are not able to fullycorrect for dynamic self-selection bias.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://papers.tinbergen.nl/10102.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 10-102/3.

as in new window
Length:
Date of creation: 14 Oct 2010
Date of revision:
Handle: RePEc:dgr:uvatin:20100102

Contact details of provider:
Web page: http://www.tinbergen.nl

Related research

Keywords: retirement; option value model; dynamic self-selection; unobserved preference heterogeneity;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Rob Euwals & Daniel van Vuuren & Ronald Wolthoff, 2005. "Early retirement behaviour in the Netherlands; evidence from a policy reform," CPB Discussion Paper 52, CPB Netherlands Bureau for Economic Policy Analysis.
  2. Bottazzi, Renata & Jappelli, Tullio & Padula, Mario, 2006. "Retirement expectations, pension reforms, and their impact on private wealth accumulation," CFS Working Paper Series 2006/10, Center for Financial Studies (CFS).
  3. Agar Brugiavini, 1999. "Social Security and Retirement in Italy," NBER Chapters, National Bureau of Economic Research, Inc, in: Social Security and Retirement around the World, pages 181-237 National Bureau of Economic Research, Inc.
  4. Angus Deaton & Christina H. Paxson, 1993. "Saving, Growth, and Aging in Taiwan," NBER Working Papers 4330, National Bureau of Economic Research, Inc.
  5. Belloni, Michele & Alessie, Rob, 2009. "The importance of financial incentives on retirement choices: New evidence for Italy," Labour Economics, Elsevier, Elsevier, vol. 16(5), pages 578-588, October.
  6. Arjan Heyma, 2004. "A structural dynamic analysis of retirement behaviour in the Netherlands," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 19(6), pages 739-759.
  7. Burkhauser, Richard V. & Butler, J. S. & Gumus, Gulcin, 2003. "Option Value and Dynamic Programming Model Estimates of Social Security Disability Insurance Application Timing," IZA Discussion Papers 941, Institute for the Study of Labor (IZA).
  8. Richard V. Burkhauser & J. S. Butler & Gulcin Gumus, 2004. "Dynamic programming model estimates of Social Security Disability Insurance application timing," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 19(6), pages 671-685.
  9. Robin L. Lumsdaine & James H. Stock & David A. Wise, 1990. "Three Models of Retirement: Computational Complexity Versus Predictive Validity," NBER Working Papers 3558, National Bureau of Economic Research, Inc.
  10. Brugiavini, Agar & Galasso, Vincenzo, 2004. "The social security reform process in Italy: where do we stand?," Journal of Pension Economics and Finance, Cambridge University Press, Cambridge University Press, vol. 3(02), pages 165-195, July.
  11. Colombino, Ugo & Hernæs, Erik & Jia, Zhiyang & Strom, Steinar, 2003. "Retirement in Italy and Norway," Memorandum, Oslo University, Department of Economics 10/2003, Oslo University, Department of Economics.
  12. Vassilis A. Hajivassiliou & Daniel L. McFadden & Paul Ruud, 1993. "Simulation of Multivariate Normal Rectangle Probabilities and their Derivatives: Theoretical and Computational Results," Working Papers, Yale University _024, Yale University.
  13. van der Klaauw, Wilbert & Wolpin, Kenneth I., 2008. "Social security and the retirement and savings behavior of low-income households," Journal of Econometrics, Elsevier, Elsevier, vol. 145(1-2), pages 21-42, July.
  14. Agar Brugiavini & Franco Peracchi, 2003. "Social Security Wealth and Retirement Decisions in Italy," LABOUR, CEIS, CEIS, vol. 17(SpecialIs), pages 79-114, 08.
  15. Anne Møller Danø & Mette Ejrnæs & Leif Husted, 2004. "Do Single Women Value Early Retirement more than Single Men?," CAM Working Papers, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics 2004-06, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics.
  16. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, Elsevier, vol. 1(1), pages 19-46, January.
  17. Chan, Sewin & Stevens, Ann Huff, 2004. "Do changes in pension incentives affect retirement? A longitudinal study of subjective retirement expectations," Journal of Public Economics, Elsevier, Elsevier, vol. 88(7-8), pages 1307-1333, July.
  18. Brugiavini, Agar & Padula, Mario, 2001. "Too much for retirement? Saving in Italy," Research in Economics, Elsevier, Elsevier, vol. 55(1), pages 39-60, March.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Peri, Giovanni & Romiti, Agnese & Rossi, Mariacristina, 2013. "Immigrants, Household Production and Women's Retirement," IZA Discussion Papers 7549, Institute for the Study of Labor (IZA).
  2. Li, Jinjing & O'Donoghue, Cathal, 2011. "Retirement Choice Simulation in Household Settings with Heterogeneous Pension Plans," IZA Discussion Papers 5866, Institute for the Study of Labor (IZA).

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:dgr:uvatin:20100102. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Antoine Maartens (+31 626 - 160 892)).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.