This paper investigates the responsiveness of individuals' retirement expectations to forward-looking measures of pension wealth accumulations. While most of the existing literature on retirement has used cross-sectional variation to identify the effects of pension and Social Security wealth on retirement behavior, we estimate fixed-effects regressions to control for unobserved heterogeneity that might be correlated with retirement plans and wealth. As expected, we find significant effects of future pension wealth accumulations on retirement expectations, but the magnitude of these effects differs substantially between OLS and fixed-effects estimation. Coefficients from fixed-effects estimation are at most half the magnitude of similar OLS regressions. Our results point to potentially large biases from the failure to control for unobserved heterogeneity in empirical models of retirement-related outcomes.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
8082.
Length: Date of creation: Jan 2001 Date of revision: Handle: RePEc:nbr:nberwo:8082
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Find related papers by JEL classification: J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped J1 - Labor and Demographic Economics - - Demographic Economics
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