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Why Not Retire? The Time and Timing Costs of Market Work

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  • Daniel S. Hamermesh

    (University of Texas at Austin)

Abstract

Retirement ages among older Americans have only recently begun to increase after their precipitous fifty-year decline. Early retirement may result from incentives provided by retirement systems; but it may also result from the rigidities imposed by market work schedules. Using the American Time Use Survey of 2003, I first examine whether additional market work is neutral with respect to the mix of non-market activities. The estimates indicate that there are fixed time costs of remaining in the labor market that alter the pattern of non-market activities, reducing leisure time and mostly increasing time devoted to household production. These costs impose a larger burden on households with lower full incomes, since wealthier households apparently purchase market substitutes that allow them to maintain the mix of non-market activities when they undertake market work. Market work also raises the set-up costs of switching among different non-market activities, thus raising the costs of generating utility-increasing variety. It also alters the daily distribution of a fixed amount of non-market activities, away from the distribution chosen when the constraint of a work schedule is not present. All these effects are mitigated by higher family income, presumably because higher-income people can purchase market substitutes that enable them to overcome the fixed time costs of market work.

Suggested Citation

  • Daniel S. Hamermesh, 2005. "Why Not Retire? The Time and Timing Costs of Market Work," Working Papers wp104, University of Michigan, Michigan Retirement Research Center.
  • Handle: RePEc:mrr:papers:wp104
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    File URL: http://www.mrrc.isr.umich.edu/publications/Papers/pdf/wp104.pdf
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    References listed on IDEAS

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    1. Reuben Gronau & Daniel S. Hamermesh, 2008. "The Demand for Variety: A Household Production Perspective," The Review of Economics and Statistics, MIT Press, vol. 90(3), pages 562-572, August.
    2. Daniel S. Hamermesh, 1996. "The Timing of Work Time Over Time," NBER Working Papers 5855, National Bureau of Economic Research, Inc.
    3. Alan L. Gustman & Thomas L. Steinmeier, 2004. "Minimum Hours Constraints, Job Requirements and Retirement," NBER Working Papers 10876, National Bureau of Economic Research, Inc.
    4. Hamermesh, Daniel S, 1999. "The Timing of Work over Time," Economic Journal, Royal Economic Society, vol. 109(452), pages 37-66, January.
    5. Lumsdaine, Robin L. & Mitchell, Olivia S., 1999. "New developments in the economic analysis of retirement," Handbook of Labor Economics,in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 49, pages 3261-3307 Elsevier.
    6. Biddle, Jeff E & Hamermesh, Daniel S, 1990. "Sleep and the Allocation of Time," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 922-943, October.
    7. Cogan, John F, 1981. "Fixed Costs and Labor Supply," Econometrica, Econometric Society, vol. 49(4), pages 945-963, June.
    8. Richard B. Freeman & Ronald Schettkat, 2005. "Marketization of household production and the EU–US gap in work," Economic Policy, CEPR;CES;MSH, vol. 20(41), pages 6-50, January.
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    Cited by:

    1. Mark Aguiar & Erik Hurst, 2007. "Measuring Trends in Leisure: The Allocation of Time Over Five Decades," The Quarterly Journal of Economics, Oxford University Press, vol. 122(3), pages 969-1006.
    2. Mark Aguiar & Erik Hurst, 2006. "Measuring trends in leisure," Proceedings, Federal Reserve Bank of San Francisco.
    3. John Laitner & Dan Silverman, 2007. "Life-Cycle Models: Lifetime Earnings and the Timing of Retirement," Working Papers wp165, University of Michigan, Michigan Retirement Research Center.
    4. 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.

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