How Does Pension Eligibility Affect Labor Supply in Couples?

44 Pages Posted: 21 Nov 2016

See all articles by Rafael Lalive

Rafael Lalive

University of Lausanne - Department of Economics; IZA Institute of Labor Economics; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Pierpaolo Parrotta

Aarhus University - School of Business and Social Sciences

Abstract

Many OECD countries are reforming their pension systems. We investigate how pension eligibility affects labor supply in couples. Inspired by a theoretical framework, we measure how the sharp change in the pension eligibility of both partners affects labor force participation.We find that both partners leave the labor force as they become eligible for a pension. The effect of their own pension eligibility is 12 percentage points for women and 28 percentage points for men. Women also reduce their labor force participation by 2 to 3 percentage points as their partner reaches pension eligibility. For men, the effect of their partner's eligibility is smaller and not significantly different from zero. For women and men with low education, the effect of their own eligibility is strong. Regardless of education level, the partner eligibility effect is strong in homogamous couples. Studying joint labor supply, we find that pension eligibility reduces labor supply in couples by 44 percentage points, approximately 4 percentage points more than in a model that ignores partner eligibility effects.

Keywords: couple labor supply, pension eligibility, full retirement age, household decisions

JEL Classification: J26, J14, C40, D10

Suggested Citation

Lalive, Rafael and Parrotta, Pierpaolo, How Does Pension Eligibility Affect Labor Supply in Couples?. IZA Discussion Paper No. 10361, Available at SSRN: https://ssrn.com/abstract=2872618 or http://dx.doi.org/10.2139/ssrn.2872618

Rafael Lalive (Contact Author)

University of Lausanne - Department of Economics ( email )

Batiment Internef
Lausanne, 1015
Switzerland

IZA Institute of Labor Economics

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

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, DE-81679
Germany

Pierpaolo Parrotta

Aarhus University - School of Business and Social Sciences ( email )

Nordre Ringgade 1
Aarhus C, DK-8000
Denmark

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
29
Abstract Views
605
PlumX Metrics