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Gradual retirement, financial incentives, and labour supply of older workers: Evidence from a stated preference analysis

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  • Elsayed, Ahmed
  • de Grip, Andries
  • Fouarge, Didier
  • Montizaan, Raymond

Abstract

Using data from a stated preferences experiment in the Netherlands, we find that replacing full-time pension schemes with schemes that offer gradual retirement opportunities induce workers to retire one year later on average. Total lifetime labour supply, however, decreases by 3.4 months, because the positive effect of delayed retirement on labour supply is cancelled out by a reduction in working hours in the years before full retirement. The impact of gradual retirement schemes is, however, heterogeneous across groups of workers. Workers in bad health who gain access to gradual retirement postpone their retirement by 1.7 months more than workers in good health. This suggests that introduction of gradual retirement alleviates, to a certain extent, the health-related burden that employees in poor health may experience in carrying out their work. Nevertheless, introduction of gradual retirement reduces the total labour supply of both groups of workers. Financial incentives, either in terms of changing pension income or the price of leisure, also affect expected retirement age, but the impact of these financial incentives does not differ with the possibility of gradual retirement. Finally, we find that gradual retirement is not a preferred option among workers, as the large majority prefers full retirement.

Suggested Citation

  • Elsayed, Ahmed & de Grip, Andries & Fouarge, Didier & Montizaan, Raymond, 2018. "Gradual retirement, financial incentives, and labour supply of older workers: Evidence from a stated preference analysis," Journal of Economic Behavior & Organization, Elsevier, vol. 150(C), pages 277-294.
  • Handle: RePEc:eee:jeborg:v:150:y:2018:i:c:p:277-294
    DOI: 10.1016/j.jebo.2018.01.012
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    References listed on IDEAS

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    Cited by:

    1. Andrea Albanese & Bart Cockx & Yannick Thuy, 2015. "Working Time Reductions at the End of the Career. Do they prolong the Time Spent in Employment?," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2015024, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    2. Songül Tolan, 2017. "The Effect of Partial Retirement on Labor Supply, Public Balances and the Income Distribution: Evidence from a Structural Analysis," Discussion Papers of DIW Berlin 1679, DIW Berlin, German Institute for Economic Research.

    More about this item

    Keywords

    Gradual retirement; Labour supply; Financial incentives; Stated preferences experiment;

    JEL classification:

    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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