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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 - INRA - Institut National de la Recherche Agronomique - UNISTRA - Université de Strasbourg - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique)

  • Rafael Lalive

    (UNIL - Université de Lausanne = 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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    8. De Brouwer, Octave & Tojerow, Ilan, 2022. "Old-Age Unemployment and Labor Supply: An Application to Belgium," IZA Discussion Papers 15628, Institute of Labor Economics (IZA).
    9. Mette Ejrnæs & Esteban García-Miralles & Mette Gørtz & Petter Lundborg, 2022. "When Death was Postponed: The Effect of HIV Medication on Work and Marriage," CEBI working paper series 22-08, University of Copenhagen. Department of Economics. The Center for Economic Behavior and Inequality (CEBI).
    10. Herman Kruse, 2021. "Joint Retirement in Couples: Evidence of Complementarity in Leisure," Scandinavian Journal of Economics, Wiley Blackwell, vol. 123(3), pages 995-1024, July.
    11. Julian Vedeler Johnsen & Kjell Vaage & Alexander Willén, 2022. "Interactions in Public Policies: Spousal Responses and Program Spillovers of Welfare Reforms [‘The impact of age pension eligibility age on retirement and program dependence: Evidence from an Austr," The Economic Journal, Royal Economic Society, vol. 132(642), pages 834-864.
    12. Esteban García-Miralles & Jonathan M. Leganza, 2021. "Joint Retirement of Couples: Evidence from Discontinuities in Denmark," CEBI working paper series 21-01, University of Copenhagen. Department of Economics. The Center for Economic Behavior and Inequality (CEBI).
    13. 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).
    14. 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.
    15. Sefane Cetin, 2021. "Joint Retirement: Evidence on the Heterogeneity of Spousal Effects," LIDAM Discussion Papers IRES 2021031, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    16. 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).
    17. 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.
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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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