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Joint Labour Supply Dynamics of Older Couples

  • Michaud, Pierre-Carl

    ()

    (University of Québec at Montréal)

This paper studies the labour force participation dynamics of older couples in the United States. Longitudinal data from the five available waves of the Health and Retirement Study (HRS) is used to investigate if the dynamics introduced by considering both spouses’ behavior provide additional information in trying to fit observed participation sequences. The paper uses a bivariate dynamic binary choice model with unobserved heterogeneity and serial correlation to disentangle the many sources of dynamics and correlation in a couple’s decision making. First, strong true state-dependence is found and results in a bunching of participation and non-participation sequences. Cross-spouse state-dependence is also found which points to indirect effects of social security and pension incentives through complementarity in leisure. Second, the Spouse Allowance program is found to have predicted effects on participation of the couple and these effects are statistically significant. A simulation exercise presents evidence that the elimination of the spouse allowance can raise participation of wives at age 62 by more than the decrease in participation of husbands at age 65.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 832.

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Length: 40 pages
Date of creation: Jul 2003
Date of revision:
Handle: RePEc:iza:izadps:dp832
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  1. Elie Tamer, 2003. "Incomplete Simultaneous Discrete Response Model with Multiple Equilibria," Review of Economic Studies, Wiley Blackwell, vol. 70(1), pages 147-165, January.
  2. Blau, David M, 1998. "Labor Force Dynamics of Older Married Couples," Journal of Labor Economics, University of Chicago Press, vol. 16(3), pages 595-629, July.
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  16. Jiménez-Martín, Sergi & Labeaga, José M. & Martínez Granado, Maite, 1999. "Health status and retirement decisions for older European couples," IRISS Working Paper Series 1999-01, IRISS at CEPS/INSTEAD.
  17. Chamberlain, Gary, 1984. "Panel data," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 22, pages 1247-1318 Elsevier.
  18. Vella, Francis & Verbeek, Marno, 1999. "Two-step estimation of panel data models with censored endogenous variables and selection bias," Journal of Econometrics, Elsevier, vol. 90(2), pages 239-263, June.
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