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The Importance of Financial Incentives on Retirement Choices

Author

Listed:
  • Michele Belloni

    (CeRP, Collegio Carlo Alberto)

  • Rob Alessie

    (Utrecht University, and Netspar)

Abstract

This study exploits a new dataset in order to quantify the effect of financial incentives on retirement choices. This dataset contains for the first time in Italy information on seniority. In accordance with the general finding in Gruber and Wise (2004), we find that financial incentives have an effect on retirement. The effect goes in the expected direction; when employees become eligible for pension benefits the change in financial incentives they experience is so high that their retirement probability increases in a sizable way. We also find that the procedure to impute seniority used in previous studies leads to a sizable measurement error. Due to this measurement error, the key parameters of the model are inconsistently estimated. Our sensitivity analysis suggests that the lack of appropriate information on seniority is an important reason for the unclear evidence so far obtained in retirement studies for Italy.

Suggested Citation

  • Michele Belloni & Rob Alessie, 2008. "The Importance of Financial Incentives on Retirement Choices," Tinbergen Institute Discussion Papers 08-052/3, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20080052
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    References listed on IDEAS

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    Cited by:

    1. C Machado & Miguel Portela, 2014. "Hours of work and retirement behaviour," IZA Journal of European Labor Studies, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 3(1), pages 1-22, December.

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    More about this item

    Keywords

    retirement; social security wealth; seniority; unobserved heterogeneity;
    All these keywords.

    JEL classification:

    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor

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