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The Effect of Inheritance Receipt on RetirementJeffrey R. BrownUniversity of Illinois College of Law; University of Illinois at Urbana-Champaign - Department of Finance; National Bureau of Economic Research (NBER) Courtney CoileWellesley College - Department of Economics; National Bureau of Economic Research (NBER) Scott J. WeisbennerUniversity of Illinois at Urbana-Champaign - Department of Finance; National Bureau of Economic Research (NBER) July 2006 Abstract: This paper uses the receipt of an inheritance to measure the effect of wealth shocks on retirement. Using the Health and Retirement Study (HRS), we first document that inheritance receipt is common among older workers - one in five households receives an inheritance over an eight-year period, with a median value of about $30,000. We find that inheritance receipt is associated with a significant increase in the probability of retirement. In particular, we find that receiving an inheritance increases the probability of retiring earlier than expected by 4.4 percentage points, or 12 percent relative to the baseline retirement rate, over an eight-year period. Importantly, this effect is stronger when the inheritance is unexpected and thus more likely to represent an exogenous shock to wealth.
Number of Pages in PDF File: 31 Keywords: Retirement, inheritance, labor supply, wealth, wealth effect, bequest JEL Classification: J14, J26 working papers seriesDate posted: July 17, 2006Suggested CitationContact Information
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