The effects of health, wealth, and wages on labor supply and retirement behavior

Eric French

No WP-00-2, Working Paper Series from Federal Reserve Bank of Chicago

Abstract: This paper analyzes the effects of wages and the Social Security System on labor supply over the life cycle. I present a model of labor supply and retirement behavior that includes a saving decision, uncertainty, and a non-negativity constraint on assets. Using data from the Panel Study of Income Dynamics, I estimate life cycle profiles for labor force participation rates, hours worked, and assets. Using the Method of Simulated Moments, I match the estimated profiles to profiles simulated by a dynamic structural model. Estimated parameters produce simulated profiles that match many aspects of the estimated profiles, including the high job exit rates at ages 62 and 65. Simulations suggest that a 20% reduction in Social Security benefits would cause individuals to delay job exit from the labor market in order to develop sufficient financial assets, increasing labor force participation rates from 28% to 35 % at age 62.

Keywords: Social security; Labor supply; Retirement; Wealth (search for similar items in EconPapers)
Date: 2000
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Citations: View citations in EconPapers (45)

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Related works:
Journal Article: The Effects of Health, Wealth, and Wages on Labour Supply and Retirement Behaviour (2005)
Working Paper: The Effects of Health, Wealth and Wages on Labor Supply and Retirement Behavior (2004)
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