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All Work and No Play: Pecuniary Versus Non-Pecuniary Factors in the Labour Supply of the Elderly

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  • J L Ford
  • K Park
  • S Sen

Abstract

Given falling birth rates, ageing baby boomers approaching retirement age as well as a pension crisis in most advanced economies, understanding the characteristics of the labour supply function of the elderly have taken on a new significance. Even in developing countries, with labour surplus economies, this is a major issue as these poor countries try to build a pension scheme with at least a minimum amount of state provision for the elderly. What motivates retired people to enter or continue in the labour force is the focus of our analysis. We use panel data from Korea which is an interesting country since it transited from developing to developed economy status within the last few decades and therefore exhibits characteristics of both underdevelopment and economic advancement. The econometric methods include probit models of: pooled data; panel data with random effects; and 2SCML, to allow for possible endogeneity bias induced by the self-declared health status of the elderly. We stress the crucial importance of pecuniary and non-pecuniary factors in determining labour supply of the elderly. Contrary to expectations, non-pecuniary factors such as health status are crucial in the decision-making process of whether to work or not to work for the elderly.

Suggested Citation

  • J L Ford & K Park & S Sen, 2009. "All Work and No Play: Pecuniary Versus Non-Pecuniary Factors in the Labour Supply of the Elderly," Discussion Papers 09-08, Department of Economics, University of Birmingham.
  • Handle: RePEc:bir:birmec:09-08
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    References listed on IDEAS

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    Keywords

    labour force participation of the retired; pension benefits; probit estimation; panel data; random effects; demographic factors; family background; helath status; income; assets;

    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
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities

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