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How Does Pension Eligibility Affect Labor Supply in Couples?

Author

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  • Pierpaolo Parrotta

    (ICN Business School, BETA - Bureau d'Économie Théorique et Appliquée - UL - Université de Lorraine - UNISTRA - Université de Strasbourg - INRA - Institut National de la Recherche Agronomique - CNRS - Centre National de la Recherche Scientifique)

  • Rafael Lalive

    (UNIL - University of Lausanne, CEPR - Center for Economic Policy Research - CEPR, IZA - Forschungsinstitut zur Zukunft der Arbeit - Institute of Labor Economics)

Abstract

Many OECD countries are reforming their pension systems. We investigate how pension eligibility affects labor supply in couples. Inspired by a theoretical framework, we measure how the sharp change in the pension eligibility of both partners affects labor force participation. We find that both partners leave the labor force as they become eligible for a pension. The effect of their own pension eligibility is 12 percentage points for women and 28 percentage points for men. Women also reduce their labor force participation by 2 to 3 percentage points as their partner reaches pension eligibility. For men, the effect of their partner's eligibility is smaller and not significantly different from zero. For women and men with low education, the effect of their own eligibility is strong. Regardless of education level, the partner eligibility effect is strong in homogamous couples. Studying joint labor supply, we find that pension eligibility reduces labor supply in couples by 44 percentage points, approximately 4 percentage points more than in a model that ignores partner eligibility effects.

Suggested Citation

  • Pierpaolo Parrotta & Rafael Lalive, 2016. "How Does Pension Eligibility Affect Labor Supply in Couples?," Post-Print hal-01515231, HAL.
    • Handle: RePEc:hal:journl:hal-01515231
    Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-01515231
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    3. Cottier, Lionel, 2018. "Culture, financial constraints, and retirement decision," Labour Economics, Elsevier, vol. 53(C), pages 128-145.
    4. Francesca Carta & Marta De Philippis, 2021. "Working horizon and labour supply: the effect of raising the full retirement age on middle-aged individuals," Temi di discussione (Economic working papers) 1314, Bank of Italy, Economic Research and International Relations Area.
    5. Geyer, Johannes & Haan, Peter & Hammerschmid, Anna & Peters, Michael, 2020. "Labor Market and Distributional Effects of an Increase in the Retirement Age," Labour Economics, Elsevier, vol. 65(C).
    6. Herault, Nicolas & Vu, Ha & Wilkins, Roger, 2020. "The Effect of Job Search Requirements on Welfare Receipt," IZA Discussion Papers 13684, Institute of Labor Economics (IZA).
    7. de Grip, Andries & Fouarge, Didier & Montizaan, Raymond, 2020. "Redistribution of individual pension wealth to survivor pensions: Evidence from a stated preferences analysis," Journal of Economic Behavior & Organization, Elsevier, vol. 173(C), pages 402-421.
    8. Dolls, Mathias & Krolage, Carla, 2019. "The Effects of Early Retirement Incentives on Retirement Decisions," VfS Annual Conference 2019 (Leipzig): 30 Years after the Fall of the Berlin Wall - Democracy and Market Economy 203486, Verein für Socialpolitik / German Economic Association.
    9. Eling, Martin & Freyschmidt, Marcel, 2021. "Frauen und Altersvorsorge - Lösungsansätze und Handlungsempfehlungen für eine nachhaltige Verbesserung der Vorsorgesituation von Frauen," I.VW HSG Schriftenreihe, University of St.Gallen, Institute of Insurance Economics (I.VW-HSG), volume 69, number 69, March.
    10. Johnsen, Julian Vedeler & Willén, Alexander & Vaage, Kjell, 2020. "Interactions in Public Policies: Spousal Responses and Program Spillovers of Welfare Reforms," Discussion Paper Series in Economics 20/2020, Norwegian School of Economics, Department of Economics.
    11. Baruffaldi, Stefano H. & Marino, Marianna & Visentin, Fabiana, 2020. "Money to move: The effect on researchers of an international mobility grant," Research Policy, Elsevier, vol. 49(8).

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    More about this item

    Keywords

    Couple labor supply; pension eligibility; full retirement age; household decisions;
    All these keywords.

    JEL classification:

    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • C40 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - General
    • D10 - Microeconomics - - Household Behavior - - - General

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