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Pathways to Retirement through Self-Employment

Author

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  • Shanthi Ramnath
  • John B. Shoven
  • Sita Nataraj Slavov

Abstract

We examine the role of self-employment in retirement transitions using a panel of administrative tax data. We find that the hazard of self-employment increases at popular retirement ages associated with Social Security eligibility, particularly for those with greater retirement wealth. Late-career transitions to self-employment are associated with a larger drop in income than similar mid-career transitions. Data from the Health and Retirement Study suggest that hours worked also fall upon switching to self-employment. These results suggest that self-employment at older ages may serve as a “bridge job,” allowing workers to gradually reduce hours and earnings along the pathway to retirement.

Suggested Citation

  • Shanthi Ramnath & John B. Shoven & Sita Nataraj Slavov, 2017. "Pathways to Retirement through Self-Employment," NBER Working Papers 23551, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:23551
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    References listed on IDEAS

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    1. Victor R. Fuchs, 1982. "Self-Employment and Labor Force Participation of Older Males," Journal of Human Resources, University of Wisconsin Press, vol. 17(3), pages 339-357.
    2. Fairlie, Robert W. & Kapur, Kanika & Gates, Susan, 2011. "Is employer-based health insurance a barrier to entrepreneurship?," Journal of Health Economics, Elsevier, vol. 30(1), pages 146-162, January.
    3. Naomi E. Feldman & Joel Slemrod, 2007. "Estimating tax noncompliance with evidence from unaudited tax returns," Economic Journal, Royal Economic Society, vol. 117(518), pages 327-352, March.
    4. Bradley Heim, 2015. "Understanding the decline in self-employment among individuals nearing retirement," Small Business Economics, Springer, vol. 45(3), pages 561-580, October.
    5. Michael D. Giandrea & Kevin E. Cahill & Joseph F. Quinn, 2008. "Self-Employment Transitions among Older American Workers with Career Jobs," Boston College Working Papers in Economics 684, Boston College Department of Economics.
    6. Boyle, Melissa A. & Lahey, Joanna N., 2010. "Health insurance and the labor supply decisions of older workers: Evidence from a U.S. Department of Veterans Affairs expansion," Journal of Public Economics, Elsevier, vol. 94(7-8), pages 467-478, August.
    7. Kevin E. Cahill & Michael D. Giandrea & Joseph F. Quinn, 2013. "New Evidence on Self-Employment Transitions Among Older Americans with Career Jobs," Working Papers 463, U.S. Bureau of Labor Statistics.
    8. Ruhm, Christopher J, 1990. "Bridge Jobs and Partial Retirement," Journal of Labor Economics, University of Chicago Press, vol. 8(4), pages 482-501, October.
    9. Marco Angrisani & Michael D. Hurd & Erik Meijer & Andrew M. Parker & Susann Rohwedder, 2013. "Labor Force Transitions at Older Ages: The Roles of Work Environment and Personality," Working Papers wp295, University of Michigan, Michigan Retirement Research Center.
    10. Zissimopoulos, Julie M. & Karoly, Lynn A., 2007. "Transitions to self-employment at older ages: The role of wealth, health, health insurance and other factors," Labour Economics, Elsevier, vol. 14(2), pages 269-295, April.
    11. Amelia Biehl & Tami Gurley-Calvez & Brian Hill, 2014. "Self-employment of older Americans: do recessions matter?," Small Business Economics, Springer, vol. 42(2), pages 297-309, February.
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    Cited by:

    1. Nolan, Anne & Barrett, Alan, 2018. "The Role of Self-Employment in Ireland's Older Workforce," IZA Discussion Papers 11663, Institute of Labor Economics (IZA).
    2. Richard Fabling, 2018. "Entrepreneurial beginnings: Transitions to self-employment and the creation of jobs," Working Papers 18_12, Motu Economic and Public Policy Research.

    More about this item

    JEL classification:

    • 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
    • J29 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Other

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