Determinants of Retirement in WP3

Frank Pellikaan

Ed Westerhout

General outline

Retirement decision is modeled using the option values of retirement and the replacement rates

Innovative part of research is inclusion of value of leisure in retirement decision by attaching a value to domestic work

Inclusion of domestic work leads to higher replacement rates and lower option values, leading to extra incentives for early retirement

Retirement and Health

The inclusion of the value of domestic work leads according to the study to the presumption that healthier individuals will retire earlier.

The conclusion for less healthy persons is unclear, if their health is really bad they have no choice but to retire, if they can continue to work they might actually postpone their retirement decision compared to a more healthy individual since the net gain from retiring is less (i.e. increase in domestic work is less).

Retirement and Health

Some comments

What determines the results of estimated health status for paid and domestic work?

How is it possible that unhealthy persons do more domestic work than their more healthy counterparts using this estimation?

Is it possible to incorporate a measure of efficiency for hours spent on domestic work?

Retirement and health

While the relative increase in hours spent on domestic work is slightly greater for healthier individuals between employment and non-employment, the absolute differences between healthy and unhealthy persons on hours spent on domestic work is small. Inclusion of UK may blur results.

Effect of health on retirement decision is not explicitly modeled such as in the case of an elasticity, the effect of health is

therefore still difficult to disentangle from other effects.

Retirement decision

General remarks

What determines the amount of hours spent on domestic work? Household characteristics etc?

On what kind of activities are the extra hours, as compared between employment status, spent on?

How does the fact that women face less incentive to retire (i.e. less increase in domestic work between employment status) agrees with an average lower age of retiring?

Overall assessment

Positive points: Part of leisure is incorporated into the retirement decision, this enhances the insights governing retirement behavior.

Welfare regime typology makes comparison between different countries interesting

Significance of health on retirement is not very conclusive

No explicit quantitative analysis

Requirement for WP4

Specific measures for each country on the relation between health and retirement behavior, for example elasticities

Will an improvement in health lead to earlier or a postponement of retirement? Other studies show a positive relation between health and a later age of retirement.