The Effect of Incentive-Induced Retirement on Spousal Retirement Rates: Evidence From a Natural Experiment

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Abstract

We identify, quantify, and explain the impact of incentive-induced early retirement (ER) of husbands on their wives' probability to retire within 1 year, using administrative data from the Netherlands. Our identification strategy is based on a policy intervention by which targeted individuals working at the central government level became unexpectedly and temporarily eligible for very generous ER benefits. This retirement window of opportunity implied for interested workers that transitions from the current job into full retirement had to be effected swiftly and irreversibly. We find that induced ER of husbands increased their wives' probability to retire by 10 percentage points. This is a strong and robust local average treatment effect. Partly, the effect runs through wives at ages when they may have been eligible for ER programs themselves. (JEL C26, J26, J120, J140).

Original languageEnglish
Pages (from-to)910-930
Number of pages21
JournalEconomic Inquiry
Volume57
Issue number2
Early online date8 Dec 2018
DOIs
Publication statusPublished - Apr 2019

Funding

∗This paper is part of the Netspar research theme “Pensions, savings and retirement decisions (II),” subproject “Retirement decisions: financial incentives, wealth and flexibility.” We thank the editor, Lars Lefgren, two anonymous referees, Marianna Brunetti, Adriaan Kalwij, Owen O’Donnell, Elena Stancanelli, and seminar audiences of the “Pensions, retirement, and the financial position of the elderly” theme meeting of Netspar, the International Pension Workshop of Netspar, the 3rd IZA@DC Young Scholar Program, the City University of New York (CUNY) Graduate Center, and the UCFS workshop for helpful and constructive comments. Bloemen: Associate Professor, Vrije Universiteit Ams-terdam, De Boelelaan 1105, 1081 HV, Amsterdam, The Netherlands; Tinbergen Institute, Gustav Mahler-plein 117, Amsterdam 1082 MS, The Netherlands; Netspar, Warandelaan 2, Tilburg, 5037 AB, The Nether-lands. IZA Bonn, Schaumburg-Lippe-Strasse 5-9, Bonn 53113, Germany. Phone +31205986037, E-mail [email protected] Hochguertel: Associate Professor, Vrije Universiteit Ams-terdam, De Boelelaan 1105, 1081 HV, Amsterdam, The Netherlands. Tinbergen Institute, Gustav Mahlerplein 117, Amsterdam 1082 MS, The Netherlands. Netspar, Warandelaan 2, Tilburg, 5037 AB, The Netherlands. Phone +31205986033, E-mail [email protected] Zweerink: Senior Researcher, CPB Netherlands Bureau for Economic Policy Analysis, Bezuidenhoutseweg 30, Den Haag 2594 AV, The Netherlands. Phone + 31614271236, E-mail [email protected] Economic Inquiry (ISSN 0095-2583) Vol. 57, No. 2, April 2019, 910–930

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