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Using Stated Preferences Data to Analyze Preferences for Full and Partial Retirement

  • Arthur van Soest
  • Arie Kapteyn
  • Julie Zissimopoulos

Structural models explaining retirement decisions of individuals or households in an inter-temporal setting are typically hard to estimate using data on actual retirement decisions, because choice sets are complicated and uncertain and for a large part unobserved by the researcher. This paper describes an experiment in which both perceived retirement opportunities and preferences for retirement are measured. For the latter, respondents evaluate how attractive they find a number of hypothetical, simplified, retirement trajectories involving early retirement, late retirement, and gradual retirement, each with its own corresponding income path. The questions were fielded in the Dutch CentERpanel. The answers are used to estimate a stylized structural life-cycle model of retirement preferences. The results suggest that, for example, many respondents could be convinced to work part-time after age 65 before retiring completely at age 70 for a reasonable financial compensation. Simulations combining the information on perceived opportunities with estimated preferences also illustrate the importance of employer imposed restrictions on retirement and the scope for increasing labor force participation of the elderly by creating opportunities for gradual retirement.

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Paper provided by RAND Corporation Publications Department in its series Working Papers with number 345.

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Length: 33 pages
Date of creation: Feb 2006
Date of revision:
Handle: RePEc:ran:wpaper:345
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  1. James H. Stock & David A. Wise, 1988. "Pensions, The Option Value of Work, and Retirement," NBER Working Papers 2686, National Bureau of Economic Research, Inc.
  2. David Revelt & Kenneth Train, 1998. "Mixed Logit With Repeated Choices: Households' Choices Of Appliance Efficiency Level," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 647-657, November.
  3. 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.
  4. Louviere,Jordan J. & Hensher,David A. & Swait,Joffre D., 2000. "Stated Choice Methods," Cambridge Books, Cambridge University Press, number 9780521788304.
  5. Michael D. Hurd, 1993. "The Effect of Labor Market Rigidities on the Labor Force Behavior of Older Workers," NBER Working Papers 4462, National Bureau of Economic Research, Inc.
  6. Train,Kenneth E., 2009. "Discrete Choice Methods with Simulation," Cambridge Books, Cambridge University Press, number 9780521747387.
  7. Hurd, Michael D, 1990. "Research on the Elderly: Economic Status, Retirement, and Consumption and Saving," Journal of Economic Literature, American Economic Association, vol. 28(2), pages 565-637, June.
  8. Euwals, Rob & Eymann, Angelika & Borsch-Supan, Axel, 2004. "Who determines household savings for old age? Evidence from Dutch panel data," Journal of Economic Psychology, Elsevier, vol. 25(2), pages 195-211, April.
  9. Robert B. Barsky & Miles S. Kimball & F. Thomas Juster & Matthew D. Shapiro, 1995. "Preference Parameters and Behavioral Heterogeneity: An Experimental Approach in the Health and Retirement Survey," NBER Working Papers 5213, National Bureau of Economic Research, Inc.
  10. repec:att:wimass:9430 is not listed on IDEAS
  11. 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.
  12. Barsky, Robert B, et al, 1997. "Preference Parameters and Behavioral Heterogeneity: An Experimental Approach in the Health and Retirement Study," The Quarterly Journal of Economics, MIT Press, vol. 112(2), pages 537-79, May.
  13. Denis LATULIPPE & John TURNER, 2000. "Partial retirement and pension policy in industrialized countries," International Labour Review, International Labour Organization, vol. 139(2), pages 179-195, 06.
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