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Labour Market Decisions of the Self-Employed in the Netherlands at the Statutory Retirement Age

Author

Listed:
  • Amparo Nagore Garcia

    (Luxembourg Institute of Socio-economic Research - LISER, Luxembourg)

  • Mariacristina Rossi

    (Department of Management, University of Torino, Italy)

  • Arthur van Soest

    (Department of Econometrics and Operations Research, Tilburg University, The Netherlands)

Abstract

We investigate retirement decisions of the self-employed in the Netherlands using administrative data. We focus on the time period around which individuals reach the statutory retirement age (SRA, 65 years in most cases). After the statutory retirement age, each Dutch resident receives the Old Age State Pension annuity (AOW), providing an income at the subsistence level. Both the timing and the magnitude of this state pension are well known in advance. According to a standard leisure/consumption trade-off life cycle model, receiving AOW should therefore have no impact on labour supply choices. While employees often face the demand side restriction of mandatory retirement, this does not apply to the self-employed. We investigate whether retirement and earnings of the self-employed change at the SRA and whether any such changes vary with, e.g., the level of financial wealth. We find a peak in retirement when self-employed reach the SRA. The evidence suggests that the benchmark of retiring at 65 is acting as a driver, due to behavioural features like anchoring or a social norm.

Suggested Citation

  • Amparo Nagore Garcia & Mariacristina Rossi & Arthur van Soest, 2018. "Labour Market Decisions of the Self-Employed in the Netherlands at the Statutory Retirement Age," Working papers 057, Department of Economics, Social Studies, Applied Mathematics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino.
    • Handle: RePEc:tur:wpapnw:057
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    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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