Ageing, health and Ageing, health and retirement in Europe: Time retirement in Europe: Time use, health and retirementuse, health and retirement

A A report by Hannu Piekkolareport by Hannu PiekkolaAndAnd

Luisa Leijola (ETLA)Luisa Leijola (ETLA)Some comments by Florence Some comments by Florence

Legros (U. Paris DauphineLegros (U. Paris Dauphine))

Global ideaGlobal ideaThe value of time is an important variable The value of time is an important variable

when people decide to retire:when people decide to retire: Its weight depends on the health status;Its weight depends on the health status; Its weight depends on a trade off between Its weight depends on a trade off between

household work and paid work household work and paid work (men/women);(men/women);

It depends on the nature of the pension It depends on the nature of the pension scheme (ie «conservative/corporatist » – scheme (ie «conservative/corporatist » – Bismarckian ? - Bismarckian ? - domestic work = domestic work = pension). pension).

Meets the problem of the adequate Meets the problem of the adequate accrual rate (NA at the margin)accrual rate (NA at the margin)

Eco. Opt. Accrual

6% in France

Soc. Opt. accrual/high incomes

8% ???

Soc. Opt. accrual/low incomes

10%

Category Males FemalesExecutives, self employed 22.5 26.0Intermediate profession (technicians, etc.) 19.5 25.0Artisan, shopkeepers, firms managers 19.5 25.0Employees 19.0 24.0Workers 17.0 23.0

Life expectancy when 60, France.Life expectancy when 60, France.

Decision to retire depends on:Decision to retire depends on:

health status;health status; a trade off between household work and paid a trade off between household work and paid

work (women value less paid work than men);work (women value less paid work than men); the nature of the pension scheme (ie the nature of the pension scheme (ie

«conservative/corporatist » – Bismarckian? - «conservative/corporatist » – Bismarckian? - domestic work =domestic work = pension) pension)

Existence of an alternativeExistence of an alternative

Raises some questionsRaises some questions

Data about household work value ? Are Data about household work value ? Are «communal household helps» wage the «communal household helps» wage the adequate variable?adequate variable?

What about the demand from firms ?What about the demand from firms ? What about households’ savings (Gruber What about households’ savings (Gruber

and Wise model without savings) and and Wise model without savings) and wealth?wealth?

Interesting resultsInteresting results

Impact of health status on option value Impact of health status on option value depends of the macroeconomic policy. depends of the macroeconomic policy. EX: Finland where high income women EX: Finland where high income women with poor health are encouraged to work with poor health are encouraged to work later (later ( option value curve at all ages) option value curve at all ages)

““Economic incentives may work poorly Economic incentives may work poorly unless the time use allocation decisions unless the time use allocation decisions are properly taken into account.”are properly taken into account.”

A questionA question

What about information?What about information?

Casamatta, Cremer and Pestieau (2004) Casamatta, Cremer and Pestieau (2004) «Disability testing and retirement » (IDEI «Disability testing and retirement » (IDEI WP) show that, in the presence of WP) show that, in the presence of imperfect information, it can be optimal to imperfect information, it can be optimal to «promote » early retirement.«promote » early retirement.

A good newA good new

« the time-use patterns of women and men « the time-use patterns of women and men become more similar after retirement ». become more similar after retirement ».

(i.e. domestic work is clearly an alternative (i.e. domestic work is clearly an alternative for paid work after retirement)for paid work after retirement)

A bad newA bad new« the time-use patterns of women and men « the time-use patterns of women and men

become more similar after retirement ». become more similar after retirement ».

Me, I find it normal that women do earn less than males: with all the domestic work Me, I find it normal that women do earn less than males: with all the domestic work you must do, you cannot invest yourself in your job as much as we – males – do.you must do, you cannot invest yourself in your job as much as we – males – do.