Gradual Retirement, Financial Incentives, and Labour Supply of Older Workers: Evidence from a Stated Preference Analysis

42 Pages Posted: 19 Oct 2015

See all articles by Ahmed Elsayed

Ahmed Elsayed

Institute for the Study of Labor (IZA); ROA

Andries de Grip

Maastricht School of Business and Economics; IZA Institute of Labor Economics

Didier Fouarge

Maastricht University

Raymond Michel Montizaan

Maastricht University - Department of Accounting and Information Management

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Abstract

Using data from a stated preferences experiment in the Netherlands, we find that replacing full-time pension schemes with schemes that offer gradual retirement opportunities induce workers to retire one year later on average. Total life-time labour supply, however, decreases with 3.4 months because the positive effect of delayed retirement on labour supply is cancelled out by the reduction in working hours before full retirement. The impact of gradual retirement schemes is, however, heterogeneous across groups of workers. Workers with non-routine job tasks retire at a later age when they can gradually retire. Financial incentives, either in terms of changing pension income or the price of leisure, also affect the expected retirement age, but the impact of these financial incentives does not differ with the possibility of gradual retirement. Finally, we find that gradual retirement is not a preferred option among workers as the large majority still prefers full retirement. This especially holds for workers with a lower wage and those with higher life expectancy.

Keywords: gradual retirement, labour supply, financial incentives

JEL Classification: J14, J26

Suggested Citation

Elsayed, Ahmed and de Grip, Andries and Fouarge, Didier and Montizaan, Raymond Michel, Gradual Retirement, Financial Incentives, and Labour Supply of Older Workers: Evidence from a Stated Preference Analysis. IZA Discussion Paper No. 9430. Available at SSRN: https://ssrn.com/abstract=2675487

Ahmed Elsayed (Contact Author)

Institute for the Study of Labor (IZA) ( email )

Schaumburg-Lippe-Strasse 5-9
Bonn, 53113
Germany

ROA ( email )

Schaumburg-Lippe-Strasse 5-9
Bonn, 53113
Germany

Andries De Grip

Maastricht School of Business and Economics ( email )

P. O. Box 616
Maastricht, NL 6200 MD
Netherlands

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Didier Fouarge

Maastricht University ( email )

P.O. Box 616
Maastricht, 6200MD
Netherlands

Raymond Michel Montizaan

Maastricht University - Department of Accounting and Information Management ( email )

Netherlands

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