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The Effect of Inheritance Receipt on Retirement

Author

Listed:
  • Jeffrey R. Brown

    (University of Illinois at Urbana-Champaign and NBER)

  • Courtney C. Coile

    (Wellesley College and NBER)

  • Scott J. Weisbenner

    (University of Illinois at Urbana-Champaign and NBER)

Abstract

This paper provides new evidence on how wealth shocks influence retirement behavior. Economic theory generally posits that leisure is a normal good, yet it is difficult to obtain reliable empirical estimates of the wealth effect because wealth is correlated with numerous unobservable characteristics that affect labor supply. We use inheritance receipt as a wealth shock and find that it is associated with a significant increase in the probability of retirement, especially when the inheritance is unexpected. This evidence has important implications for how public policies, such as pension or tax reform, may influence retirement behavior through the wealth effect. © 2010 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Suggested Citation

  • Jeffrey R. Brown & Courtney C. Coile & Scott J. Weisbenner, 2010. "The Effect of Inheritance Receipt on Retirement," The Review of Economics and Statistics, MIT Press, vol. 92(2), pages 425-434, May.
    • Handle: RePEc:tpr:restat:v:92:y:2010:i:2:p:425-434
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    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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