RETIREMENT DECISIONS EVIDENCE ON RETIREMENT ELASTICITIES
The research of retirement decisions focus on the trade-off between the retirement
wealth and the planned retirement span. Using 8 waves of the Household, Income
and Labour Dynamics in Australia (HILDA) Survey in a continuous time model,
we estimate the Frisch elasticity and the relative risk aversion. The retirement
decision elasticities (0.21 to 0.25) is low compared to the elasticity of the
intertemporal labour supply on the extensive margin. When compared to the
theoretical solution using the same model setting the constant relative risk
aversion estimate is high (2.2 to 2.3). The finding indicates a low responsiveness
to retirement pension benefits. The graph of age profile and a set of regressions
show a strong motive on smoothing consumption during the pre-retirement
period. This snapshot provides new evidence to explain the impact of financial
incentives in the Australian pension system that induces earlier retirement.
Risk Aversion, Intertemporal Labour Substitution Elasticity
Blundell, R., Macurdy, T., 1999. Labor supply: A review of alternative approaches. In:Elsevier, pp. 1559-1695.