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Early retirement decisions: Lessons from a dynamic structural modelling

Eric Delattre () and Richard Moussa
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Richard Moussa: Université de Cergy-Pontoise, THEMA

No 2018-04, THEMA Working Papers from THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise

Abstract: Early retirement has many causes according to economic and sociological literature. These causes may be the preference for leisure, nancial and health conditions, and social environment. In our paper, we aim to specify and estimate an econometric model to assess the early retirement decision-making process for aged workers. We specify a worker's utility function from which we derive worker's probability to retire earlier that depends on her health stock, estate value and preference for future. We also estimate an health production and an health consumption functions that are key factors in the individual's decision to retire earlier. Thus, we show that our model disentangles between three groups of workers: (i) those who choose early retirement, (ii) those who will never choose early retirement and (iii) those who are uncertain about early retirement. We also show that our predicted early retirement probability is a good predictor of early retirement as it is causal for observed early retirement.

Keywords: Early retirement; Grossmann Model; Space-state model; Causality (search for similar items in EconPapers)
JEL-codes: C32 C51 I12 J26 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-age, nep-dem, nep-lma and nep-upt
Date: 2018
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