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When They're Sixty-Four: Peer Effects and the Timing of Retirement

  • Kristine M. Brown
  • Ron A. Laschever
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    This paper examines the effect of peers on an individual's likelihood of retirement using an administrative dataset of all retirement-eligible Los Angeles teachers for the years 1998-2001. We use two large unexpected pension reforms that differentially impacted financial incentives within and across schools to construct an instrument for others' retirement decisions. Controlling for individual and school characteristics, we find that the retirement of an additional teacher in the previous year at the same school increases a teacher's own likelihood of retirement by 1.5-2 percentage points. We then explore some possible mechanisms through which this effect operates. (JEL H75, I21, J14, J26, J45)

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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/app.4.3.90
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    Article provided by American Economic Association in its journal American Economic Journal: Applied Economics.

    Volume (Year): 4 (2012)
    Issue (Month): 3 (July)
    Pages: 90-115

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    Handle: RePEc:aea:aejapp:v:4:y:2012:i:3:p:90-115
    Note: DOI: 10.1257/app.4.3.90
    Contact details of provider: Web page: https://www.aeaweb.org/aej-applied
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    1. Manski, C.F., 1991. "Identification of Endogenous Social Effects: the Reflection Problem," Working papers 9127, Wisconsin Madison - Social Systems.
    2. Esther Duflo & Emmanuel Saez, 2003. "The Role Of Information And Social Interactions In Retirement Plan Decisions: Evidence From A Randomized Experiment," The Quarterly Journal of Economics, MIT Press, vol. 118(3), pages 815-842, August.
    3. Giovanni Mastrobuoni, 2005. "Labor Supply Effects of the Recent Social Security Benefit Cuts: Empirical Estimates Using Cohort Discontinuities," Carlo Alberto Notebooks 33, Collegio Carlo Alberto, revised 2006.
    4. Burtless, Gary, 1986. "Social Security, Unanticipated Benefit Increases, and the Timing of Retirement," Review of Economic Studies, Wiley Blackwell, vol. 53(5), pages 781-805, October.
    5. Raj Chetty & Adam Guren & Day Manoli & Andrea Weber, 2012. "Does Indivisible Labor Explain the Difference between Micro and Macro Elasticities? A Meta-Analysis of Extensive Margin Elasticities," NBER Chapters, in: NBER Macroeconomics Annual 2012, Volume 27, pages 1-56 National Bureau of Economic Research, Inc.
    6. Asch, Beth & Haider, Steven J. & Zissimopoulos, Julie, 2005. "Financial incentives and retirement: evidence from federal civil service workers," Journal of Public Economics, Elsevier, vol. 89(2-3), pages 427-440, February.
    7. Patrick Bayer & Randi Hjalmarsson & David Pozen, 2007. "Building Criminal Capital behind Bars: Peer Effects in Juvenile Corrections," NBER Working Papers 12932, National Bureau of Economic Research, Inc.
    8. Dayanand S. Manoli & Andrea Weber, 2011. "Nonparametric Evidence on the Effects of Financial Incentives on Retirement Decisions," NBER Working Papers 17320, National Bureau of Economic Research, Inc.
    9. Emmanuel Saez & Esther Duflo, 2003. "The role of information and social interactions in retirement plan decisions: Evidence from a randomized experiment," Framed Field Experiments 00141, The Field Experiments Website.
    10. Duflo, Esther & Saez, Emmanuel, 2002. "Participation and investment decisions in a retirement plan: the influence of colleagues' choices," Journal of Public Economics, Elsevier, vol. 85(1), pages 121-148, July.
    11. Bandiera, Oriana & Barankay, Iwan & Rasul, Imran, 2009. "Social Connections and Incentives in the Workplace: Evidence from Personnel Data," CEPR Discussion Papers 7114, C.E.P.R. Discussion Papers.
    12. Andrew A. Samwick, 1998. "New Evidence on Pensions, Social Security, and the Timing of Retirement," NBER Working Papers 6534, National Bureau of Economic Research, Inc.
    13. Jonathan Gruber & David A. Wise, 2002. "Social Security Programs and Retirement Around the World: Micro Estimation," NBER Working Papers 9407, National Bureau of Economic Research, Inc.
    14. Alois Stutzer & Rafael Lalive, 2004. "The Role of Social Work Norms in Job Searching and Subjective Well-Being," Journal of the European Economic Association, MIT Press, vol. 2(4), pages 696-719, 06.
    15. Piero Cipollone & Alfonso Rosolia, 2006. "Social Interactions in High School: Lessons from an Earthquake," Temi di discussione (Economic working papers) 596, Bank of Italy, Economic Research and International Relations Area.
    16. Brian Krauth, 2004. "Simulation-based estimation of peer effects," Econometrics 0408002, EconWPA.
    17. Courtney Coile & Jonathan Gruber, 2007. "Future Social Security Entitlements and the Retirement Decision," The Review of Economics and Statistics, MIT Press, vol. 89(2), pages 234-246, May.
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