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The long reach of education: Early retirement

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  • Venti, Steven
  • Wise, David A.

Abstract

The goal of this paper is to draw attention to the long lasting effect of education on economic outcomes. We use the relationship between education and two routes to early retirement – the receipt of Social Security Disability Insurance (DI) and the early claiming of Social Security retirement benefits – to illustrate the long-lasting influence of education. We find that for both men and women with less than a high school degree the median DI participation rate is 6.6 times the participation rate for those with a college degree or more. Similarly, men and women with less than a high school education are over 25 percentage points more likely to claim Social Security benefits early than those with a college degree or more. We focus on four critical “pathways” through which education may indirectly influence early retirement – health, employment, earnings, and the accumulation of assets. We find that for women health is the dominant pathway through which education influences DI participation. For men, the health, earnings, and wealth pathways are of roughly equal magnitude. For both men and women the principal channel through which education influences early Social Security claiming decisions is the earnings pathway. We also consider the direct effect of education that does not operate through these pathways. The direct effect of education is much greater for early claiming of Social Security benefits than for DI participation, accounting for 72% of the effect of education for men and 67% for women. For women the direct effect of education on DI participation is not statistically significant, suggesting that the total effect may be through the four pathways.

Suggested Citation

  • Venti, Steven & Wise, David A., 2015. "The long reach of education: Early retirement," The Journal of the Economics of Ageing, Elsevier, vol. 6(C), pages 133-148.
    • Handle: RePEc:eee:joecag:v:6:y:2015:i:c:p:133-148
    DOI: 10.1016/j.jeoa.2015.08.001
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    2. Annette Meng & Emil Sundstrup & Lars L. Andersen, 2022. "Employee perception of managers’ attitudes towards older workers is associated with risk of loss of paid work before state pension age: prospective cohort study with register follow-up," European Journal of Ageing, Springer, vol. 19(4), pages 1375-1383, December.
    3. Kuhn, Michael & Prettner, Klaus, 2016. "Growth and welfare effects of health care in knowledge-based economies," Journal of Health Economics, Elsevier, vol. 46(C), pages 100-119.
    4. Anne M. Garvey & Manuel Ventura-Marco & Carlos Vidal-Meliá, 2021. "Does the pension system’s income statement really matter? A proposal for an NDC scheme with disability and minimum pension benefits," Economic Research-Ekonomska Istraživanja, Taylor & Francis Journals, vol. 34(1), pages 292-310, January.
    5. Walwei, Ulrich & Deller, Jürgen, 2021. "Labor Market Participation of Older Workers in International Comparison," IAB-Discussion Paper 202116, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    6. Debra L. Brucker & Katie Jajtner & Sophie Mitra, 2022. "Does Social Security promote food security? Evidence for older households," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 44(2), pages 671-686, June.
    7. Séverine Arnold & Anca Jijiie, 2020. "Retirement Ages by Socio-Economic Class," Risks, MDPI, vol. 8(4), pages 1-40, October.
    8. Gutura Rudo & Chisasa Joseph, 2024. "The Relationship between Financial Literacy and Retirement Planning among Informal Sector Workers in Randburg, South Africa," Folia Oeconomica Stetinensia, Sciendo, vol. 24(1), pages 56-74.
    9. Cetin, Sefane & Jousten, Alain, 2022. "Retirement Decision of Belgian Couples and the Impact of the Social Security System," LIDAM Discussion Papers CORE 2022024, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    10. Jiaxin Shi & Christian Dudel & Christiaan Monden & Alyson A. van Raalte, 2022. "Inequalities in retirement lifespan in the United States," MPIDR Working Papers WP-2022-015, Max Planck Institute for Demographic Research, Rostock, Germany.
    11. Гильтман М. А. & Антосик Л. В. & Токарева О. Е. & Обухович Н. В., 2021. "Повышение Пенсионного Возраста В России: Итоги 2019 Г. Пример Тюменской Области," Вопросы государственного и муниципального управления // Public administration issues, НИУ ВШЭ, issue 2, pages 154-182.
    12. Pablo Casas & Concepción Román, 2024. "The impact of artificial intelligence in the early retirement decision," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 51(3), pages 583-618, August.
    13. Michele Fabiani, 2024. "To Retire or Not to Retire? A Comprehensive Examination of Retirement Decision Dynamics in Italy," Societies, MDPI, vol. 14(5), pages 1-13, May.
    14. Anca-Stefania Jijiie & Jennifer Alonso Garcia & Séverine Arnold (-Gaille), 2019. "Mortality by socio-economic class and its impact on the retirement schemes: How to render the systems fairer?," ULB Institutional Repository 2013/300032, ULB -- Universite Libre de Bruxelles.
    15. Ulrich Walwei & Jürgen Deller, 2021. "Labour Market Participation of Older Workers: Drivers and Obstacles," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 56(6), pages 341-347, November.
    16. Yassmin Ali & Ming Fang & Pablo A. Arrutia Sota & Stephen Taylor & Xun Wang, 2019. "Social Security Benefit Valuation, Risk, and Optimal Retirement," Risks, MDPI, vol. 7(4), pages 1-31, December.

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    More about this item

    Keywords

    Education; Retirement; Disability Insurance; Social Security;
    All these keywords.

    JEL classification:

    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education
    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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