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Joint Labour Supply Dynamics of Older Couples

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  • Michaud, Pierre-Carl

    ()
    (University of Québec at Montréal)

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 Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 832.

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Length: 40 pages
Date of creation: Jul 2003
Date of revision:
Handle: RePEc:iza:izadps:dp832

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Keywords: labour supply of couples; retirement; dynamic panel data models;

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Citations

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Cited by:
  1. 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, The University of Sheffield, Department of Economics 2007002, The University of Sheffield, Department of Economics, revised Jan 2007.
  2. Gielen, Anne C., 2007. "Working Hours Flexibility and Older Workers' Labor Supply," IZA Discussion Papers 2946, Institute for the Study of Labor (IZA).
  3. Ted Aranki & Corrado Macchiarelli, 2013. "Employment Duration and Shifts into Retirement in the EU," LEQS – LSE 'Europe in Question' Discussion Paper Series, European Institute, LSE 58, European Institute, LSE.
  4. García-Gómez, Pilar & Jones, Andrew M. & Rice, Nigel, 2010. "Health effects on labour market exits and entries," Labour Economics, Elsevier, Elsevier, vol. 17(1), pages 62-76, January.
  5. 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, University of Michigan, Michigan Retirement Research Center wp179, University of Michigan, Michigan Retirement Research Center.
  6. Hospido, Laura & Zamarro, Gema, 2014. "Retirement Patterns of Couples in Europe," IZA Discussion Papers 7926, Institute for the Study of Labor (IZA).
  7. 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, Elsevier, vol. 27(4), pages 866-880, July.
  8. Zhiyang Jia, 2005. "Spousal Influence on Early Retirement Behavior," Discussion Papers, Research Department of Statistics Norway 406, Research Department of Statistics Norway.
  9. Michaud, P.C. & Vermeulen, F.M.P., 2004. "A Collective Retirement Model: Identification and Estimation in the Presence of Externalities," Discussion Paper, Tilburg University, Center for Economic Research 2004-75, Tilburg University, Center for Economic Research.
  10. Danilo Cavapozzi, 2008. "Health and Labor Supply Dynamics of Older Married Workers," "Marco Fanno" Working Papers, Dipartimento di Scienze Economiche "Marco Fanno" 0073, Dipartimento di Scienze Economiche "Marco Fanno".
  11. Diana Warren, 2013. "Retirement Decisions of Couples: The Impact of Spousal Characteristics and Preferences on the Timing of Retirement," Melbourne Institute Working Paper Series, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne wp2013n41, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
  12. Alan L. Gustman & Thomas Steinmeier, 2009. "Integrating Retirement Models," NBER Working Papers 15607, National Bureau of Economic Research, Inc.

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