This project aims to build on the existing retirement literature within economics by using a unique combination of administrative data, quasi-experimental variation and structural estimation to analyze the labor supply effects of retirement benefits. Standard economic theory highlights two channels through which retirement benefits can affect retirement decisions: through changes in lifetime income (income effect) and through changes in the marginal incentives for continuing work (price effect). Distinguishing between these effects is important for understanding the welfare and efficiency consequences of proposed social security reforms in the United States and other countries as well. However, these effects have not yet been empirically established since previous studies have lacked sufficient data or variation necessary for identification. Our separate identification of both the income and price effects is based on variation from multiple, national pension reforms in Austria between 1984 and 2003. This national level of variation is most relevant for guiding social security reform in the United States and other countries. These reforms create multiple independent changes in pension wealth and the marginal incentives for continuing work, thereby allowing for identification of the income and price effects. Previous work has relied on observational data rather than such policy variation thereby making it difficult to interpret the predictions as causal effects. In addition to overcoming this difficulty, we will embed this variation in a structural model rather than a reduced form context. Thus, our empirical strategy emphasizes how quasi-experimental variation can be used to identify structural parameters rather than reduced form coefficients. We will estimate a dynamic programming model of retirement that allows for wealth accumulation. Jointly modeling savings and retirement decisions is important to capture realistically the labor supply effects of retirement benefits. This project will highlight the significance of using quasi-experimental variation for structural estimation and elucidate how modeling assumption for savings affect the estimated income and price effects from retirement benefits.
This project will use a unique combination of administrative data, quasi-experimental variation and structural estimation to study the labor supply effects of retirement benefits. While previous studies have been limited by smaller sample sizes and observational data, we will use this data and variation to identify and estimate a dynamic programming model of retirement with endogenous savings. This project will highlight the importance of quasi-experimental variation for estimation and also elucidate how modeling assumptions for savings affect estimates of the income and price effects of retirement benefits.
| Manoli, Day; Mullen, Kathleen J; Wagner, Mathis (2015) POLICY VARIATION, LABOR SUPPLY ELASTICITIES, AND A STRUCTURAL MODEL OF RETIREMENT. Econ Inq 53:1702-1717 |
