The Effect of Wealth and Earned Income on the Decision to Retire: A Dynamic Probit Examination of Retirement

Keith Bender, Kostas Mavromaras, Ioannis Theodossiou and Zhang Wei ()
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Zhang Wei: University of Adelaide

No 7927, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper estimates the propensity to retire and the persistence of remaining retired once the decision to retire has been made in the US labour market, using a dynamic panel probit model. The estimated income effect of higher housing wealth is virtually zero and that of financial assets wealth is positive, increasing the retirement probability. The substitution effect of earned income is negative, thus decreasing the retirement probability. The retirement decision is strongly state persistent for up to three years after the initial retirement decision and the state persistence of retirement is reinforced by wealth and earned income.

Keywords: retirement decision; retirement dynamics; dynamic panel estimation; income and wealth (search for similar items in EconPapers)
JEL-codes: J14 J26 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2014-01
New Economics Papers: this item is included in nep-age and nep-lab
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Citations: View citations in EconPapers (1)

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