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Burnout and the Retirement Decision

  • Nicole Maestas


  • Xiaoyan Li


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    We introduce the process of psychological burnout and recovery as an explanation for the phenomenon known as unretirement. We illustrate theoretically how predictable time variation in burnout could generate retirement and subsequent re-entry in a standard retirement model. We apply this model to the longitudinal Health and Retirement Study, presenting a novel measure of burnout, the Burnout EX3 Index. The index is correlated with different types of work stressors, and its time profile discriminates among different types of retirees. For example, prior to retirement, burnout rises steeply for future unretirees then falls rapidly after retirement; whereas burnout among future partial retirees is low and changes little over time. Using a series of econometric models derived from our theoretical model, we show that as burnout rises, retirement becomes more probable, and as burnout recedes following retirement, re-entry becomes more probable. While access to public and private pension benefits increases the likelihood of retirement for all retirees, pension accruals are least important for those who will later unretire, suggesting that unretirees are more willing to trade future gains in pension wealth for leisure than other retirees. Indeed, for this group, the effect of burnout dominates that of the net return to work.

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    Paper provided by University of Michigan, Michigan Retirement Research Center in its series Working Papers with number wp166.

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    Length: 53 pages
    Date of creation: Oct 2007
    Date of revision:
    Handle: RePEc:mrr:papers:wp166
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    1. Nicole Maestas, 2007. "Back to Work: Expectations and Realizations of Work after Retirement," Working Papers 196.2, RAND Corporation Publications Department.
    2. repec:att:wimass:9722 is not listed on IDEAS
    3. Linda A. Wray, 2003. "Mental Health and Labor Force Exits in Older Workers: The Mediating or Moderating Roles of Physical Health and Job Factors," Working Papers wp047, University of Michigan, Michigan Retirement Research Center.
    4. Pierre-Olivier Gourinchas & Jonathan A. Parker, 1999. "Consumption Over the Life Cycle," NBER Working Papers 7271, National Bureau of Economic Research, Inc.
    5. Alan L. Gustman & Thomas L. Steinmeier, 1982. "Minimum Hours Constraints and Retirement Behavior," NBER Working Papers 0940, National Bureau of Economic Research, Inc.
    6. Stock, James H & Wise, David A, 1990. "Pensions, the Option Value of Work, and Retirement," Econometrica, Econometric Society, vol. 58(5), pages 1151-80, September.
    7. Nicole Maestas & Xiaoyan Li, 2006. "Discouraged Workers? Job Search Outcomes of Older Workers," Working Papers wp133, University of Michigan, Michigan Retirement Research Center.
    8. Leora Friedberg, 2000. "The Labor Supply Effects of the Social Security Earnings Test," The Review of Economics and Statistics, MIT Press, vol. 82(1), pages 48-63, February.
    9. Blau, David M, 1994. "Labor Force Dynamics of Older Men," Econometrica, Econometric Society, vol. 62(1), pages 117-56, January.
    10. MaCurdy, Thomas E, 1981. "An Empirical Model of Labor Supply in a Life-Cycle Setting," Journal of Political Economy, University of Chicago Press, vol. 89(6), pages 1059-85, December.
    11. Keane, Michael P, 1992. "A Note on Identification in the Multinomial Probit Model," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(2), pages 193-200, April.
    12. Gustman, Alan L & Steinmeier, Thomas L, 2000. "Retirement in Dual-Career Families: A Structural Model," Journal of Labor Economics, University of Chicago Press, vol. 18(3), pages 503-45, July.
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