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Interdependent durations in joint retirement

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  • Bo Honore

    (Institute for Fiscal Studies and Princeton)

  • Aureo de Paula

    (Institute for Fiscal Studies and University of Pennsylvania)

Abstract

In this paper we specify and use a new duration model to study joint retirement in married couples using the Health and Retirement Study. Whereas conventionally used models cannot account for joint retirement, our model admits joint retirement with positive probability, allows for simultaneity and nests the traditional proportional hazards model. In contrast to other statistical models for simultaneous durations, it is based on Nash bargaining and it is therefore interpretable in terms of economic behaviour. We provide a discussion of relevant identifying variation and estimate our model using indirect inference. The main empirical finding is that the simultaneity seems economically important. In our prefered specification the indirect utility associated with being retired increases by approximately 10% if one's spouse is already retired. By comparison, a defined benefit pension plan increases indirect utility by 20-30%. The estimated model also predicts that the indirect effect of a change in husbands' pension plan on wives' retirement dates is about 10% of the direct effect on the husbands.

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Bibliographic Info

Paper provided by Centre for Microdata Methods and Practice, Institute for Fiscal Studies in its series CeMMAP working papers with number CWP05/13.

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Date of creation: Mar 2013
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Handle: RePEc:ifs:cemmap:05/13

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  1. Trivedi, Pravin K. & Zimmer, David M., 2007. "Copula Modeling: An Introduction for Practitioners," Foundations and Trends(R) in Econometrics, now publishers, vol. 1(1), pages 1-111, April.
  2. Magnac, Thierry & Robin, Jean-Marc & Visser, Michael, 1995. "Analysing Incomplete Individual Employment Histories Using Indirect Inference," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 10(S), pages S153-69, Suppl. De.
  3. 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.
  4. Valerie Lechene & Martin Browning, 2004. "Collective and unitary models: a clarification," Economics Series Working Papers 191, University of Oxford, Department of Economics.
  5. Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
  6. Chiappori, Pierre-Andre, 1992. "Collective Labor Supply and Welfare," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 437-67, June.
  7. Pierre-André Chiappori & Olivier Donni & Ivana Komunjer, 2012. "Learning from a Piece of Pie," Review of Economic Studies, Oxford University Press, vol. 79(1), pages 162-195.
  8. de Paula, Áureo, 2009. "Inference in a synchronization game with social interactions," Journal of Econometrics, Elsevier, vol. 148(1), pages 56-71, January.
  9. Alan L. Gustman & Thomas Steinmeier, 2009. "Integrating Retirement Models," NBER Working Papers 15607, National Bureau of Economic Research, Inc.
  10. Mark Y. An & Bent Jesper Christensen & Nabanita Datta Gupta, 2004. "Multivariate mixed proportional hazard modelling of the joint retirement of married couples," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 19(6), pages 687-704.
  11. Ridder, Geert, 1990. "The Non-parametric Identification of Generalized Accelerated Failure-Time Models," Review of Economic Studies, Wiley Blackwell, vol. 57(2), pages 167-81, April.
  12. Courtney C. Coile, 2004. "Health Shocks and Couples' Labor Supply Decisions," NBER Working Papers 10810, National Bureau of Economic Research, Inc.
  13. Manski, Charles F, 1993. "Identification of Endogenous Social Effects: The Reflection Problem," Review of Economic Studies, Wiley Blackwell, vol. 60(3), pages 531-42, July.
  14. 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.
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Cited by:
  1. Hospido, Laura & Zamarro, Gema, 2014. "Retirement Patterns of Couples in Europe," IZA Discussion Papers 7926, Institute for the Study of Labor (IZA).

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