earnings and pension compensation the effect of eligibility pension compensation is shown to rise with age and tenure until the worker becomes eligible to receive benefits at this point pension compensation drops sharply if workers are paid their marginal product in each period earnings grow at a lower rate prior to eligibility but must increase when the worker reaches the age of eligibility this hypothesis is tested using data from the retirement history study and earnings are found to rise significantly after eligibility this finding supports the concept of spot market compensation and is in direct conflict with the predictions of lazear type lifetime contracts

social security in panama a multiperiod analysis of income distribution abstract a unique multiperiod data set is used to look at the income distribution effects of the retirement portion of the social security system of panama while it is clear that the system is an important source of income for workers it is argued that its true redistributive importance is greatly exaggerated using a multiperiod view it is found that previously high wage and urban workers are disproportionately represented among current recipients it is also argued that social security has substantially reduced the work effort of these workers hence the appropriateness of the present social security system is questioned on both equity and efficiency grounds

determinants of agricultural economics faculty retirement the retirement experiences of faculty who had retired from 1862 land grant universities are described health financial family and professional characteristics of early retirees are contrasted to those of late retirees determinants of faculty retirement are identified in the context of a general retirement model model results indicate that years of service to retirement programs number of children mental health health trends age at initial employment and faculty spouse age differences are positively related to retirement age salary levels net worth and extension appointments are inversely related to retirement age implications of recent changes in the agricultural economics profession on expected retirement behavior are discussed

intergenerational transfers borrowing constraints and saving behavior evidence from the housing market abstract we examine the effects of intergenerational transfers on saving behavior by analyzing transfers targeted to first time home purchases transfer recipients have a shorter time to save for a down payment of 9 20 for each dollar of transfer received total savings falls by 29 40 cents and the down payment rises by 61 71 cents transfer recipients increase the value of the home purchased but by an amount that is much lower than possible if the transfer were fully leveraged in addition transfers appear to help households achieve certain down payment thresholds that give favorable mortgage terms

the strategic bequest motive although recent research suggests that intergenerational transfers play an important role in aggregate capital accumulation our understanding of bequest motives remains incomplete we develop a simple model of strategic bequests in which a testator influences the decisions of his beneficiaries by holding wealth in bequeathable forms and by conditioning the division of bequests on the beneficiaries actions the model generates falsifiable empirical predictions that are inconsistent with other theories of intergenerational transfers we present econometric and other evidence that strongly suggests that bequests are often used as compensation for services rendered by beneficiaries

social security and the retirement decision the effect of social security and private pensions on individual retirement decisions is modeled relaxing in turn three commonly maintained assumptions perfect capital markets actuarial fairness and certain lifetimes which together imply that there is no effect in each case raising the contribution level can cause systematic changes of either sign in general in individual retirement decisions for social security the effects associated with forced saving and deviations from actuarial fairness probably tend to advance retirement but those effects that arise solely from the insurance aspect of social security and private pensions are ambiguous in sign owing to the presence of a substitution effect that tends to delay retirement because the insurance benefits can be fully realized only by working longer

the family as an incomplete annuities market families can self insure against uncertain dates of death through implicit or explicit agreements with respect to consumption and interfamily transfers interfamily transfers need have nothing to do with altruistic feelings they may simply reflect risk sharing behavior of completely selfish family members although family annuity markets are incomplete even small families can substitute by more than 70 percent for perfect market annuities given adverse selection and transaction costs family risk pooling may be preferred to public market annuities in the absence of public annuities these risk sharing arrangements provide powerful incentives for marriage and family formation

the analytics of seasonal migration a framework that yields different possible patterns of migration as optimal solutions to a simple utility maximization problem is presented and explored it is shown that seasonal migration arises as an optimal endogenous response to a comparison of costs of living and of separation and returns to work over a set of three alternative options even if a year long migration is feasible

borrowing constraints and two sided altruism with an application to social security abstract we develop the implications of borrowing constraints and two sided altruism in an overlapping generations framework with agents who live three periods our analysis identifies six equilibrium patterns of intertemporal and intergenerational linkages in the no loan economy one of which corresponds to the traditional life cycle model and one of which corresponds to barro s dynastic model novel linkage patterns involve parent to child transfers early in the life cycle child to parent gifts late in the life cycle or both capital accumulation behavior and the consequences of fiscal policy interventions depend often critically on which linkage pattern prevails we show for example how unfunded social security interventions can significantly depress aggregate capital accumulation even when every generation is linked to its successor generation by altruistic transfers we also derive a non ricardian neutrality result for gift motive economies that holds whether or not borrowing constraints bind and whether or not parent and child are connected by an operative altruism motive at all points in the life cycle

the role of intergenerational transfers and life cycle saving in the accumulation of wealth he purpose of this paper is to review what economists know at present about the following question how large a portion of the existing wealth is the result of a bequest motive that is of accumulation for the specific purpose of leaving bequests i will also endeavor to clarify why an answer to this question is of interest in the early keynesian period when the study of national saving first attracted wide interest relatively little attention was paid to what led people to save though it was generally understood that the main systematic reason was to leave bequests j m keynes in the famous chapter 9 of the general theory of employment interest and money 1936 had listed seven distinct motives for saving besides the leaving of bequests but five of these which include to increase one s future income or to insure one s independence and power implied that all or nearly all the accumulation would finally wind up as bequeathed wealth this in turn meant that most private wealth originated through bequests that is it either had been received through bequests or was destined to be bequeathed and indeed how else could society accumulate wealth however keynes 1936 p 107 also mentioned two further motives precaution that is to build up a reserve against unforeseen contingencies and foresight that is to provide for an anticipated future relation between the income and the needs of the individual or his family different from that which exists in the present as for example in relation to old age family education or the maintenance of dependents these motives in contrast to most of the previous ones have the

saving and capital market imperfections the italian experience italy s saving rate is high by international standards even when differences in growth are taken into account we argue that credit and insurance market imperfections provide a plausible explanation for the high italian saving rate we also reject the potential roles of the public sector informal financial arrangements bequests and the slope of the earnings profile as alternative explanations of the evidence

age discrimination laws and labor market efficiency in lazear s model of long term incentive contracts age discrimina tion laws barring age based involuntary terminations preclude such contracts reducing efficiency alternatively such laws may serve as precommitment devices for these contracts without pre venting firms from offering strong financial incentives to induce retirement at specific ages in this case age discrimination laws may encourage lazear contracts hence increasing efficiency we assess evidence on these alternative interpretations using variation in state and federal age discrimination laws the evidence indicates that age discrimination laws steepen age earnings profiles for co horts entering the labor market suggesting that these laws encour age the use of lazear contracts

the impact of human capital investments on pension benefits this article develops a model with deferred compensation and severance pay that predicts that workers bear all the costs and receive all the returns of human capital investments and that specific investments yield higher returns than general investments this model also predicts that pensions which efficiently defer compensation will be positively related to specific investments evidence from the national longitudinal survey of older men confirms these predictions participation in company sponsored training programs proxying for specific investments increases the probability of pension receipt and the level of benefits more general training outside the firm has much smaller effects on pensions

the labour market performance of recent migrants migrant workers constitute a vital component of many western labour markets although migrants can benefit greatly by moving to higher wage economies it is important to compare their labour market outcomes with those of native born workers in this paper we discuss factors that have been found to influence labour market success in the receiving country and examine the actual performance of recent migrants to the uk the uk provides a good case study for conducting such an exercise because of the very large increases in immigration that have been seen over the past decade we find that labour market performance varies greatly between migrant groups and that outcomes have changed noticeably following the uk government s decision to allow migrants from poland and other central and eastern european countries more or less free access to the labour market after eu enlargement in 2004

the effect of liquidity constraints on consumption a cross sectional analysis this paper examines the effect of liquidity constraints on consumption expenditures using a single year cross section data set a reduced form equation for consumption is estimated on high saving households by the tobit procedure to account for the selectivity bias since high saving households are not likely to be liquidity constrained the estimated equation is an appropriate description of how desired consumption that would be forthcoming without liquidity constraints is related to the variables available in the cross section data when the reduced form equation is used to predict desired consumption the gap between desired consumption and measured consumption is most evident for young households

double dipping the combined effects of social security and civil service pensions on employee retirement we consider the retirement behavior of civilian employees of the united states government unlike previous studies this investigation is based upon a data set containing fairly complete and accurate information about the social security and employer provided pensions for which employees are or ultimately will be eligible these data permit us to specify the financial aspects of individual retirement decisions with a reasonable degree of precision a large fraction of civil service pensioners is eligible to receive social security benefits because a part of their working careers was spent in social security covered employment the prevalence of double pension coverage among government employees has raised serious equity questions about the treatment of civil servants by social security and these questions have led to various suggestions for pension reform partly the reform proposals have been put forward due to the perceived unfairness of double dipping which arises from the double pension coverage of government employees our analysis finds 1 both the amount of a federal pension entitlement and the expected wait until the pension commences affect the timing of retirement from the federal service 2 the rate of anticipated wage growth significantly affects individual decisions to remain in federal employment 3 workers who are eligible to ultimately receive social security in some cases show a different pattern of retirement than do workers not vested in social security however our analysis does not reveal any massive shift of federal workers into social security covered employment in order to benefit from the tilt in the social security formula this abstract was borrowed from another version of this item

a comparison of national saving rates in the uk us and italy abstract we develop the approach of gokhale kotlikoff and sabelhaus 1996 understanding the postwar decline in us saving a cohort analysis brookings papers on economic activity 0 315 390 based on the life cycle model of savings to decompose the differences in the national saving rates between the uk us and italy our work suggests that the us saving rate is lower principally because americans on average retire later in contrast the italian saving rate is higher predominantly because italians are credit constrained particularly when young we also found that demography and the different tax and benefit systems are able to explain little of the cross sectional differences in saving rates the study accounts for the possible importance of inter generational private transfers in determining saving rates

labor supply responses to marginal social security benefits evidence from discontinuities abstract a key question for social security reform is whether workers respond to the link on the margin between the social security taxes they pay and the social security benefits they will receive we estimate the effects of the marginal social security benefits that accrue with additional earnings on three measures of labor supply retirement age hours and labor earnings we develop a new approach to identifying these incentive effects by exploiting five provisions in the social security benefit rules that generate discontinuities in marginal benefits or non linearities in marginal benefits that converge to discontinuities as uncertainty about the future is resolved we find that individuals approaching retirement age 52 and older respond to the social security tax benefit link on the extensive margin of their labor supply decisions we estimate that a 10 increase in the net of tax share reduces the two year retirement hazard by a statistically significant 2 0 percentage points from a base rate of 15 the evidence with regard to labor supply responses on the intensive margin is more mixed we estimate that the elasticity of hours with respect to the net of tax share is 0 42 and statistically significant but we do not find a statistically significant earnings elasticity though we lack statistical power to estimate results within subsamples precisely the retirement response is driven mostly by the female subsample while the hours response comes from the male subsample

government debt redistributive fiscal policies and the interaction between borrowing constraints and intergenerational altrusim abstract we show how borrowing constraints intergenerational altruism and their interaction shape the aggregate savings response to government debt and fiscal policies that redistribute resources between living generations we also characterize the conditions under which borrowing constraints bind and the altruistic transfer motive operates in terms of the strength of the altruism motive the shape of the lifetime productivity profile the willingness to substitute consumption intertemporally and other factors finally we characterize the dynamic response of aggregate savings to nonneutral government debt policies in economies with binding borrowing constraints

short term labour migration from the republic of armenia to the russian federation we explore the determinants of short term labour migration from armenia to russia based on a unique panel dataset a dynamic switching regression model with endogenous switching is applied our evidence pinpoints migration experience the expected individual income gap from migration low job opportunities in armenia and the possibility of diversifying income risks as the most important determinants family ties turn out to be insignificant the hypothetical income gap is about 280 per cent several explanations are provided for the fact that some individuals do not migrate in spite of a large income gap

do retirement dreams come true the effect of unanticipated events on retirement plans analyzing data from the retirement history study the authors find that the retirement plans of male workers aged 58 63 in 1969 were significantly affected by unanticipated events over the next decade specifically unanticipated increases in social security wealth induced retirement earlier than originally planned as did deterioration in personal health whereas the recession of the 1970s tended to delay retirement this evidence that policy changes do affect retirement behavior in systematic ways provides support for the decision by congress to defer until the turn of the century the application of several important provisions of the 1983 amendments to the social security act

a structural dynamic analysis of retirement behaviour in the netherlands this study focuses on determinants of elderly labour force participation and retirement decisions in the netherlands this is analysed by a dynamic programming model for the simultaneous choice of retirement age and route which includes social insurance and private pensions eligibility conditions for early retirement lifecycle wage and health profiles and layoffs special attention is given to opportunities for and the effect of participation policies results show that institutional structures of benefit and pension programmes are prime determinants of retirement particularly eligibility conditions and potential substitution between exit routes and that dynamic aspects are relevant for understanding retirement behaviour copyright 2004 john wiley sons ltd

economic determinants of the optimal retirement age an empirical investigation in this paper we examine how the structures of earnings social security and pension benefits affect retirement behavior we use an intertemporal model of labor supply paying special attention to the institutional features of private pensions and social security benefits this theoretical formulation produces comparative dynamic predictions and guides empirical modeling data from a new survey of workers and their income opportunities are used to implement the empirical model on the basis of empirical retirement estimates we conclude that 1 people with higher base wealth retire earlier and 2 those who expect to gain more by postponing retirement retire later

economic determinants of workers retirement decisions economic determinants of workers retirement decisions the landscape for older workers has changed dramatically in recent decades governments have made cuts to public pension programs private pensions have shifted from defined benefit to defined contribution plans equity and housing markets have been unusually volatile and workers have experienced declining morbidity and mortality at the same time the labor force participation rate for older men and women has been rising over the past two decades implying later retirement are these phenomena related this paper reviews the large and growing body of literature exploring the economic determinants of workers retirement decisions including public and private pensions wealth and savings health and health insurance and labor demand

future social security entitlements and the retirement decision abstract a critical question for social security policy is how program incentives affect retirement behavior we use the health and retirement survey hrs to examine the impact of social security incentives on male retirement we implement forward looking models whereby individuals consider the incentives to work in all future years we find that forward looking incentive measures for social security are significant determinants of retirement we also find that private pension incentives have roughly similar effects our findings suggest that social security policies that increase the incentives to work at older ages can significantly reduce the labor force exit rate of older workers

is mandatory retirement overrated evidence from the 1970s in this paper we argue that mandatory retirement is only one aspect of a much broader system that influences an individual s retirement decision we look at responses over time to variations in mandatory retirement rules faced by a sample of private sector workers aged 62 64 in 1973 this is done within a model that specifically includes the economic incentives present in social security and pension systems we find that the impact of a mandatory retirement rule on work is considerably smaller than a simple comparison of those with and without mandatory retirement would imply

the importance of the measure of health in empirical estimates of the labor supply of older men abstract when a more objective measure of health is used economic variables previously masked by self reported health measures are found to significantly affect work effort of older men this may explain differences in results of previous studies even when the same empirical specifications are used

the effect of separation bonuses on voluntary quits evidence from the military s downsizing this paper analyzes the decision of mid career personnel to voluntarily leave the u s military in response to a financial incentive program a model of the separation decision is tested using data on navy and air force enlisted personnel who were targeted for the buyout in 1992 two alternative estimates are provided one from a fixed effects model and one from a structural annualized cost of leaving model our basic results indicate the financial incentive had a modest effect in inducing additional quits the impact of the separation bonus however was much larger for occupations facing a threat of involuntary layoff

motives for private income transfers private income transfers are becoming increasingly recognized as a key aspect of the u s economy the majority of private income transfers occur inter vivos i e between living persons but very little is known about this type of transfer behavior this paper tests alternative hypotheses concerning motivation for inter vivos transfers two motives are considered altruism and exchange evidence presented here casts doubt on the altruistic model of transfer behavior observed patterns for inter vivos transfers are more consistent with exchange related motives this finding has important implications for the effects of public transfer programs on the distribution of economic well being

how responsive are private transfers to income evidence from a laissez faire economy abstract in recent years there has been burgeoning interest in how private transfers respond to household income or transfer derivatives much of it is fueled by the specter of crowding out the more responsive are private transfers the more likely they could be supplanted by expansions in public transfers weakening or destroying the latter s distributive impact yet there is also an emerging consensus that actual transfer derivatives are trivial at least for the united states suggesting that crowding out might loom larger in the minds of some economists than in the data but perhaps crowding out is a fait accompli in the united states accordingly we focus on the philippines which has a much smaller public sector we also pursue a novel theoretical angle which generates a sharp non linear relationship between private transfer receipts and income in the form of a spline our empirical work applies recently developed estimation techniques that treat the spline s threshold as an unknown parameter and they uncover transfer derivatives much larger than conventional methods reveal notably private transfers patterns are consistent with altruistic preferences effective risk sharing or both in accord with theoretical predictions however strong transfer derivatives prevail only among low income households our findings suggest that attempts to aid the poor could be thwarted by private responses which leak benefits to richer households in the form of lighter burdens of support for less fortunate kin so the problems that operative private transfers create for public redistribution policy first pointed out by becker and barro over 25 years ago do indeed matter empirically

a theory of migration as a response to occupational stigma a theory is developed of labor migration that is prompted by a desire to avoid social humiliation in a general equilibrium framework it is shown that as long as migration can reduce humiliation sufficiently migration will occur even between two identical economies migration increases the number of individuals who choose to perform degrading jobs and consequently migration lowers the price of the good produced in the sector that is associated with low social status moreover the greater an individual s aversion to performing degrading jobs the more likely it is that he will experience a welfare gain when the economy opens up

accepting an early retirement bonus an empirical study the presence of special early retirement bonuses can change the work incentives of older workers this study applies a pension acceptance model to acceptance of an early retirement pension bonus probabilities of acceptance range from 18 to 33 it also simulates acceptance behavior without the bonus with probabilities of acceptance ranging from 11 to 30

pensions and indenture premia the implicit pension contract has provided a theoretical basis for the observed relation between pensions less quitting and earlier retirement but it also has encountered difficulty explaining why wages seem too high in pension firms this anomaly has been taken by some to imply that efficiency wages not pension capital losses explain why quitting is abnormally low in defined benefit pensions in this paper i pursue an alternative explanation that the implicit contract model is oversimplified because it ignores supply conditions facing long tenure firms i show that once an allowance is made for compensation required by workers for entering long term labor contracts numerous anomalous empirical observations in the pension market are explicable

the early retirement decision new empirical evidence on the influence of health many studies have examined the influence of health on retirement but there may be problems with the various health measures used a major criticism of the most frequently used variables is that they may reflect ex post rationalizations of retirement in this paper i examine a variety of health variables focusing directly on the health measurement issue as it relates to retirement research new measures of health are developed with individual self evaluations of health status unlike most previous findings the empirical results suggest that economic variables play a more important role than health in retirement decisions

the effects of social security reforms on retirement ages and retirement incomes abstract recent changes legislated in the u s social security system have altered the economic incentives to work and retire some older workers will respond to these new incentives by retiring at different ages this paper evaluates the signs and magnitudes of these responses four specific changes in the structure of social security benefits are examined raising the normal retirement age delaying the cost of living adjustment lowering early retirement benefits and increasing late retirement payments behavioral parameters are estimated using an ordered logit model of retirement ages these are used to predict how retirement behavior might respond to each of the four reforms predicted changes in retirement ages will be too small to compensate retirees for reductions in benefit formulas thus the social security s financial burden will be eased but retirees incomes will fall on average

projecting faculty retirement factors influencing individual decisions the impending elimination of mandatory retirement for tenured faculty on january 1 1994 public law 99 592 1986 has raised the visibility of a number of questions about faculty retirement behavior what are the factors that influence individual faculty members retirement decisions how important are financial and nonfinancial considerations why do faculty in private institutions work to a later age on average than their colleagues in public institutions are there other systematic for example genderor discipline related differences as well this paper is an attempt to answer such questions about individual faculty retirement behavior the paper utilizes data collected as part of a comprehensive national study that projected faculty retirements through the year 2003 for over 35 000 faculty at 101 doctoral research comprehensive and general baccalaureate institutions see our 1990 paper the discussion that follows uses data from that broader institutional survey and from a survey of 747 faculty members age 55 and over who had separated from this same set of 101 institutions among the information provided by the 518 usable responses were data on factors that influence faculty members decisions regarding the appropriate time to retire

consumption and capital market imperfections an international comparison the excess sensitivity of consumption to current income fluctuations is higher in countries where consumers borrow less low levels of consumer debt can result either from capital market imperfections or from a low demand for loans the evidence suggests that the former view is more appropriate than the latter and thus supports the hypothesis that excess sensitivity may be attributed to liquidity constraints rather than to other factors copyright 1989 by american economic association

social security unanticipated benefit increases and the timing of retirement between 1969 and 1972 real u s social security retirement benefits rose by 20 the rise was unanticipated and followed over 15 years of relatively constant real benefits this paper proposes a model of retirement behaviour in which workers respond differently although in a theoretically consistent manner to the anticipated and unanticipated components of the social security benefit they can receive upon retirement the retirement age decision in the presence of unanticipated benefit changes is shown to be a special case of utility maximization under a nonlinear budget constraint the model is estimated using the longitudinal retirement history survey between 1969 and 1973 real social security benefits for u s workers with fixed earnings histories were raised by more than 20 these increases were the first significant increases in social security since the early 1950 s at the same time that retirement benefits were rising the trend toward early retirement among older american men accelerated in the period from 1965 to 1970 the labour force participation rate of men aged 55 to 64 fell 1 6 percentage points from 84x6 to 83 0 but in the five years after 1970 the rate fell an additional 7 4 points to 75 6 the participation rate of men over 65 fell by 1 1 points in the five years after 1965 but by 5 2 points during the mid 1970 s 1 not surprisingly a large share of this labour force decline has been attributed to the effects of the social security increases enacted in 1969 and 1972 the purpose of this paper is to determine the precise effect of the unanticipated benefit increases on the timing of retirement the effect of social security on the age at retirement has been the subject of lively debate in recent years the literature has been reviewed in two recent papers by mitchell and fields 1982 and hurd 1983 who reach nearly opposite conclusions about the lessons that can be drawn from past empirical research mitchell and fields find that no definite judgment can be reached about the effects of social security on retirement while hurd argues that more careful studies have all found a significant and meaningful effect of social security on early retirement certainly the earlier studies by boskin 1977 and boskin and hurd 1978 found very large social security effects with boskin concluding that the social security system has been the major factor in the explosion in earlier retirement boskin 1977 p 1 very recent studies by burkhauser and quinn 1983 burtless and moffitt 1984 diamond and hausman 1984 fields and mitchell 1984 and hausman and wise 1985 have found smaller social security effects however none of them dealt explicitly with the rapid rise in real benefits during the early 1970 s the approach taken in this paper differs significantly from that in the earlier research just cited the proposed econometric model takes full account of the nonlinear relationship between goods consumption and the age at retirement introduced by social security