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The Importance of Economic Expectations for Retirement Entry

Author

Listed:
  • Barbara Broadway

    (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)

  • John P. Haisken-DeNew

    (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)

Abstract

We estimate hazard rates of retirement entry as a function of the option value of work. The individuals’ expectations about the future economy are incorporated in the option value of work, through which they can impact on the timing of retirement entry. In a scenario where individuals expect a strong upturn, the annual hazard rate of retirement entry (average 8.4%) is reduced by 6.0% or half a percentage point compared to a scenario where they expect a downturn. Had individuals been able to anticipate the Global Financial Crisis, the mere expectation of this downturn would have increased retirement entries by 8.7%.

Suggested Citation

  • Barbara Broadway & John P. Haisken-DeNew, 2014. "The Importance of Economic Expectations for Retirement Entry," Melbourne Institute Working Paper Series wp2014n28, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    • Handle: RePEc:iae:iaewps:wp2014n28
    as

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    File URL: https://melbourneinstitute.unimelb.edu.au/downloads/working_paper_series/wp2014n28.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Retirement; expectations; pensions;
    All these keywords.

    JEL classification:

    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions

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