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A Mixture Model of Household Retirement Choice

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  • Jia, Zhiyang

    (Dept. of Economics, University of Oslo)

Abstract

This paper analyzes the labor market participation behavior of the elderly couples when a new option (early retirement) becomes available to the husband. Unlike other studies of household labor supply model, which assume that all the households follow the same decision making structure, we assume there are two types of household, the cooperative type and the non-cooperative type. When facing the choice problem, those belong to the non-cooperative type behave according to a Stackelberg game with male as the leader, while those of the cooperative type follow a simple unitary model. Under this assumption, we formulate a mixture model using the latent class analysis framework. This model explicitly takes account of the unobserved heterogeneity in decision making structures. The empirical estimation of the model is based on register data from Statistics Norway. We find that more than half of the households belong to the non-cooperative type. And these households on average have lower education level than those of the cooperative type. Our conjecture is that this may suggest that it is easier for higher education couples to communicate and compromise to reach a efficient solution.

Suggested Citation

  • Jia, Zhiyang, 2003. "A Mixture Model of Household Retirement Choice," Memorandum 04/2003, Oslo University, Department of Economics.
    • Handle: RePEc:hhs:osloec:2003_004
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    File URL: http://www.sv.uio.no/econ/english/research/unpublished-works/working-papers/pdf-files/2003/Memo-04-2003.pdf
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    References listed on IDEAS

    as
    1. Erik Hernæs & Zhiyang Jia & Steinar Strøm, 2007. "Retirement in Non-Cooperative and Cooperative Families," Chapters, in: Koichi Hamada & Hiromi Kato (ed.), Ageing and the Labor Market in Japan, chapter 7, Edward Elgar Publishing.
    2. Michael D. Hurd, 1990. "The Joint Retirement Decision of Husbands and Wives," NBER Chapters, in: Issues in the Economics of Aging, pages 231-258, National Bureau of Economic Research, Inc.
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    5. Chen, Zhiqi & Woolley, Frances, 2001. "A Cournot-Nash Model of Family Decision Making," Economic Journal, Royal Economic Society, vol. 111(474), pages 722-748, October.
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    7. Bresnahan, Timothy F. & Reiss, Peter C., 1991. "Empirical models of discrete games," Journal of Econometrics, Elsevier, vol. 48(1-2), pages 57-81.
    8. Bergstrom, Theodore C., 1993. "A survey of theories of the family," Handbook of Population and Family Economics, in: M. R. Rosenzweig & Stark, O. (ed.), Handbook of Population and Family Economics, edition 1, volume 1, chapter 2, pages 21-79, Elsevier.
    9. Hiedemann, Bridget, 1998. "A Stackelberg model of Social Security acceptance decisions in dual career households," Journal of Economic Behavior & Organization, Elsevier, vol. 34(2), pages 263-278, February.
    10. Lundberg, Shelly & Pollak, Robert A, 1994. "Noncooperative Bargaining Models of Marriage," American Economic Review, American Economic Association, vol. 84(2), pages 132-137, May.
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    Cited by:

    1. Iskhakov, Fedor, 2008. "Dynamic Programming Model of Health and Retirement," Memorandum 03/2008, Oslo University, Department of Economics.
    2. Li, Jinjing & O'Donoghue, Cathal, 2011. "Retirement Choice Simulation in Household Settings with Heterogeneous Pension Plans," IZA Discussion Papers 5866, Institute of Labor Economics (IZA).

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    More about this item

    Keywords

    household labor supply; retirement; latent class analysis; heterogeneity; econometric models;
    All these keywords.

    JEL classification:

    • D10 - Microeconomics - - Household Behavior - - - General
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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