IDEAS home Printed from https://ideas.repec.org/p/eag/rereps/12.html

The Trend in Retirement

Author

Abstract

A model with leisure production and endogenous retirement is used to explain the declining labor-force participation rates of elderly males. Using the Health and Retirement Study, the model is calibrated to cross-sectional data on the labor-force participation rates of elderly US males by age and their average drop in market consumption in the year 2000. Running the calibrated model for the period 1850 to 2000, a prediction of the evolution of the cross-section is obtained and compared with data. The model is able to predict both the increase in retirement since 1850 and the observed drop in market consumption at the moment of retirement. The increase in retirement is driven by rising real wages and a falling price of leisure goods over time.

Suggested Citation

  • Karen Kopecky, 2005. "The Trend in Retirement," Economie d'Avant Garde Research Reports 12, Economie d'Avant Garde.
    • Handle: RePEc:eag:rereps:12
    as

    Download full text from publisher

    File URL: http://www.karenkopecky.net/RetirePaper.pdf
    File Function: full text
    Download Restriction: None
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. repec:ucp:bknber:9780226304557 is not listed on IDEAS
    2. Williamson Jeffrey G., 1995. "The Evolution of Global Labor Markets since 1830: Background Evidence and Hypotheses," Explorations in Economic History, Elsevier, vol. 32(2), pages 141-196, April.
    3. Benhabib, Jess & Rogerson, Richard & Wright, Randall, 1991. "Homework in Macroeconomics: Household Production and Aggregate Fluctuations," Journal of Political Economy, University of Chicago Press, vol. 99(6), pages 1166-1187, December.
    4. Mark Bils & Peter J. Klenow, 2001. "Quantifying Quality Growth," American Economic Review, American Economic Association, vol. 91(4), pages 1006-1030, September.
    5. David M. Blau, 2008. "Retirement and Consumption in a Life Cycle Model," Journal of Labor Economics, University of Chicago Press, vol. 26(1), pages 35-71.
    6. Michael Hurd & Susann Rohwedder, 2003. "The Retirement-Consumption Puzzle: Anticipated and Actual Declines in Spending at Retirement," NBER Working Papers 9586, National Bureau of Economic Research, Inc.
    7. Orazio P. Attanasio & Guglielmo Weber, 1993. "Consumption Growth, the Interest Rate and Aggregation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 60(3), pages 631-649.
    8. Mark Aguiar & Erik Hurst, 2005. "Consumption, Expenditure, and Home Production over the Lifecycle," 2005 Meeting Papers 303, Society for Economic Dynamics.
    9. Costa, Dora L., 1998. "The Evolution of Retirement," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226116082.
    10. Jeremy Greenwood & Ananth Seshadri & Mehmet Yorukoglu, 2005. "Engines of Liberation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 72(1), pages 109-133.
    11. Peter Gottschalk & Timothy M. Smeeding, 1997. "Cross-National Comparisons of Earnings and Income Inequality," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 633-687, June.
    12. Ellen R. McGrattan & Edward C. Prescott, 2000. "Is the stock market overvalued?," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 24(Fall), pages 20-40.
    13. Kalemli-Ozcan, Sebnem & Ryder, Harl E. & Weil, David N., 2000. "Mortality decline, human capital investment, and economic growth," Journal of Development Economics, Elsevier, vol. 62(1), pages 1-23, June.
    14. Krueger, Alan B & Pischke, Jorn-Steffen, 1992. "The Effect of Social Security on Labor Supply: A Cohort Analysis of the Notch Generation," Journal of Labor Economics, University of Chicago Press, vol. 10(4), pages 412-437, October.
    15. Michael Hurd & Kathleen McGarry, 1993. "The Relationship Between Job Characteristics and Retirement," NBER Working Papers 4558, National Bureau of Economic Research, Inc.
    16. Jeremy Greenwood & Ananth Seshadri & Guillaume Vandenbroucke, 2002. "The baby boom and baby bust: some macroeconomics for population economics," Proceedings, Federal Reserve Bank of San Francisco, issue nov.
    17. Sebnem Kalemli-Ozcan & David Weil, 2010. "Mortality change, the uncertainty effect, and retirement," Journal of Economic Growth, Springer, vol. 15(1), pages 65-91, March.
    18. John Laitner & Dan Silverman, 2005. "Estimating Life—Cycle Parameters from Consumption Behavior at Retirement”," Working Papers wp099, University of Michigan, Michigan Retirement Research Center.
    19. Owen, John D, 1971. "The Demand for Leisure," Journal of Political Economy, University of Chicago Press, vol. 79(1), pages 56-76, Jan.-Feb..
    20. C. Lee, "undated". "Sectoral Shift and Labor Force Participation of Older Males in the United States, 1880-1940," CPE working papers 0011, University of Chicago - Centre for Population Economics.
    21. Hansen, G D, 1993. "The Cyclical and Secular Behaviour of the Labour Input: Comparing Efficiency Units and Hours Worked," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 8(1), pages 71-80, Jan.-Marc.
    22. Guvenen, Fatih, 2006. "Reconciling conflicting evidence on the elasticity of intertemporal substitution: A macroeconomic perspective," Journal of Monetary Economics, Elsevier, vol. 53(7), pages 1451-1472, October.
    23. Jeremy Greenwood & Ananth Seshadri & Guillaume Vandenbroucke, 2005. "The Baby Boom and Baby Bust," American Economic Review, American Economic Association, vol. 95(1), pages 183-207, March.
    24. Alan L. Gustman & Thomas L. Steinmeier, 2004. "Minimum Hours Constraints, Job Requirements and Retirement," NBER Working Papers 10876, National Bureau of Economic Research, Inc.
    25. Ellen R. McGrattan & Richard Rogerson, 2004. "Changes in hours worked, 1950?2000," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 28(Jul), pages 14-33.
    26. Menahem E. Yaari, 1965. "Uncertain Lifetime, Life Insurance, and the Theory of the Consumer," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 32(2), pages 137-150.
    27. Gustman, Alan L. & Steinmeier, Thomas L., 2005. "The social security early entitlement age in a structural model of retirement and wealth," Journal of Public Economics, Elsevier, vol. 89(2-3), pages 441-463, February.
    28. Guillaume Vandenbroucke, 2005. "A Model of the Trends in Hours," IEPR Working Papers 05.40, Institute of Economic Policy Research (IEPR).
    29. Banks, James & Blundell, Richard & Tanner, Sarah, 1998. "Is There a Retirement-Savings Puzzle?," American Economic Review, American Economic Association, vol. 88(4), pages 769-788, September.
    30. Mark Aguiar & Erik Hurst, 2004. "Consumption vs. Expenditure," NBER Working Papers 10307, National Bureau of Economic Research, Inc.
    31. Robin L. Lumsdaine & James H. Stock & David A. Wise, 1996. "Retirement Incentives: The Interaction between Employer-Provided Pensions, Social Security, and Retiree Health Benefits," NBER Chapters, in: The Economic Effects of Aging in the United States and Japan, pages 261-293, National Bureau of Economic Research, Inc.
    32. Chulhee Lee, 2001. "The expected length of male retirement in the United States, 1850-1990," Journal of Population Economics, Springer;European Society for Population Economics, vol. 14(4), pages 641-650.
    33. B. Douglas Bernheim & Jonathan Skinner & Steven Weinberg, 2001. "What Accounts for the Variation in Retirement Wealth among U.S. Households?," American Economic Review, American Economic Association, vol. 91(4), pages 832-857, September.
    34. Robert J. Gordon, 1990. "The Measurement of Durable Goods Prices," NBER Books, National Bureau of Economic Research, Inc, number gord90-1, September.
    35. Dora L. Costa, 1998. "The Evolution of Retirement: An American Economic History, 1880-1990," NBER Books, National Bureau of Economic Research, Inc, number cost98-1, September.
    36. Lee, Chulhee, 2002. "Sectoral Shift And The Labor-Force Participation Of Older Males In The United States, 1880 1940," The Journal of Economic History, Cambridge University Press, vol. 62(02), pages 512-523, June.
    37. Michael R. Haines, 1994. "Estimated Life Tables for the United States, 1850-1900," NBER Historical Working Papers 0059, National Bureau of Economic Research, Inc.
    38. Anderson, Patricia M & Gustman, Alan L & Steinmeier, Thomas L, 1999. "Trends in Male Labor Force Participation and Retirement: Some Evidence on the Role of Pensions and Social Security in the 1970s and 1980s," Journal of Labor Economics, University of Chicago Press, vol. 17(4), pages 757-783, October.
    39. Rios-Rull, Jose-Victor, 1993. "Working in the Market, Working at Home, and the Acquisition of Skills: A General-Equilibrium Approach," American Economic Review, American Economic Association, vol. 83(4), pages 893-907, September.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Blundell, R. & French, E. & Tetlow, G., 2016. "Retirement Incentives and Labor Supply," Handbook of the Economics of Population Aging, in: Piggott, John & Woodland, Alan (ed.), Handbook of the Economics of Population Aging, edition 1, volume 1, chapter 0, pages 457-566, Elsevier.
    2. Christopher House & John Laitner & Dmitriy Stolyarov, 2008. "Valuing Lost Home Production Of Dual Earner Couples," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(2), pages 701-736, May.
    3. Michael D. Hurd & Susann Rohwedder, 2005. "Changes in Consumption and Activities in Retirement," Working Papers wp096, University of Michigan, Michigan Retirement Research Center.
    4. El Mekkaoui de Freitas, Najat & Oliveira Martins, Joaquim, 2014. "Health, pension benefits and longevity: How they affect household savings?," The Journal of the Economics of Ageing, Elsevier, vol. 3(C), pages 21-28.
    5. John Laitner & Daniel Silverman, 2006. "Consumption, Retirement, and Social Security: Evaluating the Efficiency of Reform with a Life-Cycle Model," Working Papers wp142, University of Michigan, Michigan Retirement Research Center.
    6. Jeremy Greenwood & Nezih Guner, 2009. "Marriage and Divorce since World War II: Analyzing the Role of Technological Progress on the Formation of Households," NBER Chapters, in: NBER Macroeconomics Annual 2008, Volume 23, pages 231-276, National Bureau of Economic Research, Inc.
    7. Moshe Hazan, 2006. "Longevity and Hours over the Lifetime: Data and Implications," 2006 Meeting Papers 416, Society for Economic Dynamics.
    8. Christopher House & John Laitner & Dmitriy Stolyarov, 2006. "Home Production by Dual Earner Couples and Consumption During Retirement," Working Papers wp143, University of Michigan, Michigan Retirement Research Center.
    9. Vandenbroucke, Guillaume, 2009. "Trends in hours: The U.S. from 1900 to 1950," Journal of Economic Dynamics and Control, Elsevier, vol. 33(1), pages 237-249, January.
    10. Hurd, Michael D. & Rohwedder, Susann, 2013. "Heterogeneity in spending change at retirement," The Journal of the Economics of Ageing, Elsevier, vol. 1, pages 60-71.
    11. Lührmann Melanie, 2010. "Consumer Expenditures and Home Production at Retirement – New Evidence from Germany," German Economic Review, De Gruyter, vol. 11(2), pages 225-245, May.
    12. Ryan Edwards, 2013. "The cost of uncertain life span," Journal of Population Economics, Springer;European Society for Population Economics, vol. 26(4), pages 1485-1522, October.
    13. Börsch-Supan, A. & Härtl, K. & Leite, D.N., 2016. "Social Security and Public Insurance," Handbook of the Economics of Population Aging, in: Piggott, John & Woodland, Alan (ed.), Handbook of the Economics of Population Aging, edition 1, volume 1, chapter 0, pages 781-863, Elsevier.
    14. Sánchez-Romero, Miguel & d׳Albis, Hippolyte & Prskawetz, Alexia, 2016. "Education, lifetime labor supply, and longevity improvements," Journal of Economic Dynamics and Control, Elsevier, vol. 73(C), pages 118-141.
    15. Mark Aguiar & Erik Hurst, 2005. "Lifestyle prices and production," Public Policy Discussion Paper 05-3, Federal Reserve Bank of Boston.
    16. Laitner, John & Silverman, Dan, 2012. "Consumption, retirement and social security: Evaluating the efficiency of reform that encourages longer careers," Journal of Public Economics, Elsevier, vol. 96(7-8), pages 615-634.
    17. José M. Labeaga & Rubén Osuna, 2007. "Expenditures at retirement by Spanish households," Working Papers 2007-36, FEDEA.
    18. Olafsson, Arna & Pagel, Michaela, 2024. "Retirement puzzles: New evidence from personal finances," Journal of Public Economics, Elsevier, vol. 234(C).
    19. Aguiar, M. & Hurst, E., 2016. "The Macroeconomics of Time Allocation," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 203-253, Elsevier.
    20. Mark Aguiar & Erik Hurst, 2004. "Consumption vs. Expenditure," NBER Working Papers 10307, National Bureau of Economic Research, Inc.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eag:rereps:12. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Jeremy Greenwood (email available below). General contact details of provider: http://www.jeremygreenwood.net/EAG.htm .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.