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Early retirement decisions: Lessons from a dynamic structural modelling

Author

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  • Eric Delattre
  • Richard Moussa

    (Université de Cergy-Pontoise, THEMA)

Abstract

Early retirement has many causes according to economic and sociological literature. These causes may be the preference for leisure, nancial and health conditions, and social environment. In our paper, we aim to specify and estimate an econometric model to assess the early retirement decision-making process for aged workers. We specify a worker's utility function from which we derive worker's probability to retire earlier that depends on her health stock, estate value and preference for future. We also estimate an health production and an health consumption functions that are key factors in the individual's decision to retire earlier. Thus, we show that our model disentangles between three groups of workers: (i) those who choose early retirement, (ii) those who will never choose early retirement and (iii) those who are uncertain about early retirement. We also show that our predicted early retirement probability is a good predictor of early retirement as it is causal for observed early retirement.

Suggested Citation

  • Eric Delattre & Richard Moussa, 2018. "Early retirement decisions: Lessons from a dynamic structural modelling," THEMA Working Papers 2018-04, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    • Handle: RePEc:ema:worpap:2018-04
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    File URL: http://thema.u-cergy.fr/IMG/pdf/2018-04.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Early retirement; Grossmann Model; Space-state model; Causality;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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