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How Much Do State Economics and Other Characteristics Affect Retirement Behavior?

  • Alicia H. Munnell
  • Mauricio Soto
  • Robert K. Triest
  • Natalia A. Zhivan

Economic conditions and labor force participation vary significantly across the states of the Union. Despite these marked differences, little is known about the reasons for such variations in retirement patterns. Using the Current Population Survey for the period 1977-2007, this paper demonstrates that the differences in the labor force participation of men age 55-64 are related to the labor market conditions, the nature of employment, and the employee characteristics in each state as well as a pseudo replacement rate. These variables explain more than one-third of the total variation. Even moving to a fixed-effects model only cuts the explanatory power by half. The question remains, however, whether these relationships reflect different populations or unique aspects of the state. To answer that question we turn to the Health and Retirement Study (HRS). We estimate equations for the probability of working and for the expected retirement for men in their late fifties and early sixties. In each case, the first equation includes just the state-level variables and the second the state-level variables and the HRS demographic and economic information for each individual. The results show that the state-level variables explain almost none of the variation in the probability of working or the expected retirement age, but most of the state-level variables are statistically significant both before and after the inclusion of the HRS information.

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Paper provided by Center for Retirement Research in its series Working Papers, Center for Retirement Research at Boston College with number wp2008-12.

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Length: 36 pages
Date of creation: Aug 2008
Date of revision: Sep 2008
Handle: RePEc:crr:crrwps:wp2008-12
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  1. Olivier Jean Blanchard & Lawrence F. Katz, 1992. "Regional Evolutions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(1), pages 1-76.
  2. Alicia H. Munnell & Robert K. Triest & Natalia Jivan, 2004. "How Do Pensions Affect Expected and Actual Retirement Ages?," Working Papers, Center for Retirement Research at Boston College wp2004-27, Center for Retirement Research, revised Nov 2004.
  3. Alan Krueger & Mikael Lindahl, 2000. "Education for Growth: Why and For Whom?," Working Papers 808, Princeton University, Department of Economics, Industrial Relations Section..
  4. Leora Friedberg & Michael Owyang & Anthony Webb, 2008. "Identifying Local Differences in Retirement Patterns," Working Papers, Center for Retirement Research at Boston College wp2008-18, Center for Retirement Research, revised Dec 2008.
  5. Edward M. Feasel, 2002. "Understanding Unemployment Across California Counties," Economic Inquiry, Western Economic Association International, vol. 40(1), pages 12-30, January.
  6. Kelly D. Edmiston, 2006. "Workers' Compensation and State Employment Growth," Journal of Regional Science, Wiley Blackwell, vol. 46(1), pages 121-145.
  7. Alan L. Gustman & Thomas L. Steinmeier, 1983. "A Structural Retirement Model," NBER Working Papers 1237, National Bureau of Economic Research, Inc.
  8. Dan A. Black & Xiaoli Liang, 2005. "Local Labor Market Conditions and Retirement Behavior," Working Papers, Center for Retirement Research at Boston College wp2005-8, Center for Retirement Research, revised May 2005.
  9. Chan, Sewin & Stevens, Ann Huff, 2001. "Job Loss and Employment Patterns of Older Workers," Journal of Labor Economics, University of Chicago Press, vol. 19(2), pages 484-521, April.
  10. Andrew A. Samwick, 1998. "New Evidence on Pensions, Social Security, and the Timing of Retirement," NBER Working Papers 6534, National Bureau of Economic Research, Inc.
  11. John Odland & Mark Ellis, 1998. "Variations in the Labour Force Experience of Women Across Large Metropolitan Areas in the United States," Regional Studies, Taylor & Francis Journals, vol. 32(4), pages 333-347.
  12. Topel, Robert H, 1986. "Local Labor Markets," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages S111-43, June.
  13. James H. Stock & David A. Wise, 1988. "Pensions, The Option Value of Work, and Retirement," NBER Working Papers 2686, National Bureau of Economic Research, Inc.
  14. Margarita Sapozhnikov & Robert K. Triest, 2007. "Population Aging, Labor Demand, and the Structure of Wages," Working Papers, Center for Retirement Research at Boston College wp2007-14, Center for Retirement Research, revised Oct 2007.
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