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Retirement in Australia: A Closer Look at the Financial Incentives

Diana Warren and Umut Oguzoglu ()

Melbourne Institute Working Paper Series from Melbourne Institute of Applied Economic and Social Research, The University of Melbourne

Abstract: In Australia, labour force participation among older people, particularly men over the age of 55, has been declining over the last 30 years. Previous research has found that in many OECD countries, the retirement income system actually provides incentives for older workers to retire early rather than remain in the work force. We use data from the first five waves of the Household, Income and Labour Dynamics in Australia (HILDA) survey to identify any financial incentives present in the Australian retirement income system. Following Gruber & Wise (2004), we model retirement behaviour where individuals retire in the period that the present value of their lifetime retirement income is maximised. We also utilise an option value model that considers the trade-off between utility drawn from leisure and utility drawn from labour income. Our findings suggest that for men the Australian retirement system provides incentives to retire early, while for women financial incentives are less significant, as the factors that influence women’s retirement behaviour are more commonly found to be family related, rather than financial incentives.

Pages: 37 pages
Date: 2007-08
New Economics Papers: this item is included in nep-age and nep-lab
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Related works:
Journal Article: Retirement in Australia: A Closer Look at the Financial Incentives (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:iae:iaewps:wp2007n24

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