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Retirement Incentives and Expectations

Author

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  • Sewin Chan
  • Ann Huff Stevens

Abstract

This paper investigates the responsiveness of individuals' retirement expectations to forward-looking measures of pension wealth accumulations. While most of the existing literature on retirement has used cross-sectional variation to identify the effects of pension and Social Security wealth on retirement behavior, we estimate fixed-effects regressions to control for unobserved heterogeneity that might be correlated with retirement plans and wealth. As expected, we find significant effects of future pension wealth accumulations on retirement expectations, but the magnitude of these effects differs substantially between OLS and fixed-effects estimation. Coefficients from fixed-effects estimation are at most half the magnitude of similar OLS regressions. Our results point to potentially large biases from the failure to control for unobserved heterogeneity in empirical models of retirement-related outcomes.

Suggested Citation

  • Sewin Chan & Ann Huff Stevens, 2001. "Retirement Incentives and Expectations," NBER Working Papers 8082, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:8082
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    References listed on IDEAS

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    3. James F. Moore & Olivia S. Mitchell, 1997. "Projected Retirement Wealth and Savings Adequacy in the Health and Retirement Study," NBER Working Papers 6240, National Bureau of Economic Research, Inc.
    4. Robin L. Lumsdaine & James H. Stock & David A. Wise, 1992. "Three Models of Retirement: Computational Complexity versus Predictive Validity," NBER Chapters,in: Topics in the Economics of Aging, pages 21-60 National Bureau of Economic Research, Inc.
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    6. John Rust & Christopher Phelan, 1997. "How Social Security and Medicare Affect Retirement Behavior in a World of Incomplete Markets," Econometrica, Econometric Society, vol. 65(4), pages 781-832, July.
    7. Courtney Coile & Jonathan Gruber, 2000. "Social Security and Retirement," NBER Working Papers 7830, National Bureau of Economic Research, Inc.
    8. Steven F. Venti & David A. Wise, 2001. "Choice, Chance, and Wealth Dispersion at Retirement," NBER Chapters,in: Aging Issues in the United States and Japan, pages 25-64 National Bureau of Economic Research, Inc.
    9. Ruhm, Christopher J, 1990. "Bridge Jobs and Partial Retirement," Journal of Labor Economics, University of Chicago Press, vol. 8(4), pages 482-501, October.
    10. Gustman, Alan L. & Steinmeier, Thomas L., 1999. "Effects of pensions on savings: analysis with data from the health and retirement study," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 50(1), pages 271-324, June.
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    13. Alan L. Gustman & Thomas L. Steinmeier, 1999. "What People Don't Know About Their Pensions and Social Security: An Analysis Using Linked Data from the Health and Retirement Study," NBER Working Papers 7368, National Bureau of Economic Research, Inc.
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    Citations

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    Cited by:

    1. Spataro, Luca, 2005. "Social security incentives and retirement decisions in Italy: An empirical insight," Research in Economics, Elsevier, vol. 59(3), pages 223-256, September.
    2. Michael Baker & Jonathan Gruber & Kevin Milligan, 2003. "The retirement incentive effects of Canada's Income Security programs," Canadian Journal of Economics, Canadian Economics Association, vol. 36(2), pages 261-290, May.
    3. Marjan, MAES, 2008. "Financial and redistributive impact of reforming the old-age pension system in Belgium," Discussion Papers (ECON - Département des Sciences Economiques) 2008040, Université catholique de Louvain, Département des Sciences Economiques.
    4. Julia Lynn Coronado & Maria Perozek, 2003. "Wealth effects and the consumption of leisure: retirement decisions during the stock market boom of the 1900s," Finance and Economics Discussion Series 2003-20, Board of Governors of the Federal Reserve System (U.S.).
    5. Luca Spataro, "undated". "Social Security And Retirement Decisions In Italy," Discussion Papers 2003/1, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    6. Alan L. Gustman & Thomas L. Steinmeier, 2001. "Imperfect Knowledge, Retirement and Saving," NBER Working Papers 8406, National Bureau of Economic Research, Inc.

    More about this item

    JEL classification:

    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • J1 - Labor and Demographic Economics - - Demographic Economics

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