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Bulls, Bears, and Retirement Behavior

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  • Courtney C. Coile
  • Phillip B. Levine

Abstract

The historic boom and bust in the stock market over the past decade had the potential to significantly alter the retirement behavior of older workers. Previous research examining the impact of wealth shocks on labor supply supports the plausibility of this hypothesis. In this paper, we examine the relationship between stock market performance and retirement behavior using the Health and Retirement Study (HRS), Current Population Survey (CPS), and Survey of Consumer Finances (SCF). We first present a descriptive analysis of the wealth holdings of older households and simulate the labor supply response among stockholders necessary to generate observed patterns in retirement. We show that few households have substantial stock holdings and that they would have to be extremely responsive to market fluctuations to explain observed labor force patterns. We then exploit the unique pattern of boom and bust along with variation in stock exposure to generate a double quasi-experiment, comparing the retirement and labor force re-entry patterns over time of those more and less exposed to the market. Any difference in behavior that emerged during the boom should have reversed itself during the bust. We find no evidence that changes in the stock market drive aggregate trends in labor supply.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10779.

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Date of creation: Sep 2004
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Publication status: published as Coile, Courtney C. and Phillip B. Levine. “Bulls, Bears, and Retirement Behavior.” Industrial and Labor Relations Review 59, 3 (April 2006):408-429.
Handle: RePEc:nbr:nberwo:10779

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  1. Gabor Kezdi & Purvi Sevak, 2004. "Economic Adjustment of Recent Retirees to Adverse Wealth Shocks," Working Papers wp075, University of Michigan, Michigan Retirement Research Center.
  2. Purvi Sevak, 2002. "Wealth Shocks and Retirement Timing: Evidence from the Nineties," Working Papers wp027, University of Michigan, Michigan Retirement Research Center.
  3. Leora Friedberg & Anthony Webb, 2003. "Retirement and the Evolution of Pension Structure," NBER Working Papers 9999, National Bureau of Economic Research, Inc.
  4. Eric M. Engen & William G. Gale & Cori E. Uccello, 2004. "Effects of Stock Market Fluctuations on the Adequacy of Retirement Wealth Accumulation," Working Papers, Center for Retirement Research at Boston College 2004-16, Center for Retirement Research.
  5. Andy Eschtruth & Jonathan Gemus, 2002. "Are Older Workers Responding To The Bear Market?," Just the Facts jtf-5, Center for Retirement Research.
  6. Guido W. Imbens & Donald B. Rubin & Bruce I. Sacerdote, 2001. "Estimating the Effect of Unearned Income on Labor Earnings, Savings, and Consumption: Evidence from a Survey of Lottery Players," American Economic Review, American Economic Association, vol. 91(4), pages 778-794, September.
  7. Douglas Holtz-Eakin & David Joulfaian & Harvey S. Rosen, 1992. "The Carnegie Conjecture: Some Empirical Evidence," NBER Working Papers 4118, National Bureau of Economic Research, Inc.
  8. Ing-Haw Cheng & Eric French, 2000. "The effect of the run-up in the stock market on labor supply," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q IV, pages 48-65.
  9. Donald Bruce & Douglas Holtz-Eakin & Joseph F. Quinn, 2000. "Self-Employment and Labor Market Transitions at Older Ages," Boston College Working Papers in Economics 490, Boston College Department of Economics.
  10. Gary Burtless & Joseph F. Quinn, 2002. "Is Working Longer the Answer for an Aging Workforce?," Boston College Working Papers in Economics 550, Boston College Department of Economics.
  11. Joulfaian, D. & Wilheim, M.O., 1992. "Inheritance and Labor Supply," Papers 6-92-2, Pennsylvania State - Department of Economics.
  12. Michael Hurd & Monika Reti, 2003. "The Effects of Large Capital Gains on Work and Consumption: Evidence from Four Waves of the HRS," Working Papers 03-14, RAND Corporation Publications Department.
  13. Alan L. Gustman & Thomas L. Steinmeier, 2002. "Retirement and the Stock Market Bubble," NBER Working Papers 9404, National Bureau of Economic Research, Inc.
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