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Bulls, bears, and retirement behavior

  • Courtney C. Coile
  • Phillip B. Levine

The authors examine the relationship between stock market performance and retirement behavior. They first present a descriptive analysis of the wealth holdings of older households and simulate the labor supply response among stockholders necessary to generate observed retirement patterns. Few households, they find, have substantial stock holdings, and these holdings would have to be extremely responsive to market fluctuations to explain observed labor force patterns. The authors then exploit stock market fluctuations since the early 1980s (particularly the boom and bust between 1995 and 2002), 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. The authors find no evidence that changes in the stock market drove aggregate trends in labor supply. (Free full-text download available at http://digitalcommons.ilr.cornell.edu/ilrreview/.)

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Article provided by ILR Review, Cornell University, ILR School in its journal ILR Review.

Volume (Year): 59 (2006)
Issue (Month): 3 (April)
Pages: 408-429

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Handle: RePEc:ilr:articl:v:59:y:2006:i:3:p:408-429
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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. Holtz-Eakin, Douglas & Joulfaian, David & Rosen, Harvey S, 1993. "The Carnegie Conjecture: Some Empirical Evidence," The Quarterly Journal of Economics, MIT Press, vol. 108(2), pages 413-35, May.
  3. 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.
  4. Purvi Sevak, 2002. "Wealth Shocks and Retirement Timing: Evidence from the Nineties," Working Papers wp027, University of Michigan, Michigan Retirement Research Center.
  5. Leora Friedberg & Anthony Webb, 2003. "Retirement and the Evolution of Pension Structure," NBER Working Papers 9999, National Bureau of Economic Research, Inc.
  6. Eric M. Engen & William G. Gale & Cori E. Uccello, 2005. "Effects Of Stock Market Fluctuations On The Adequacy Of Retirement Wealth Accumulation," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 51(3), pages 397-418, 09.
  7. David Joulfaian & Mark O. Wilhelm, 1994. "Inheritance and Labor Supply," Journal of Human Resources, University of Wisconsin Press, vol. 29(4), pages 1205-1234.
  8. Andy Eschtruth & Jonathan Gemus, 2002. "Are Older Workers Responding To The Bear Market?," Just the Facts jtf-5, Center for Retirement Research.
  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. 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.
  11. 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.
  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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