The effects of employment uncertainty, unemployment insurance, and wealth shocks on the retirement behavior of older americans

  1. Hugo Benítez Silva
  2. J. Ignacio García Pérez 1
  3. Sergi Jiménez Martín 2
  1. 1 Universidad Pablo de Olavide
    info

    Universidad Pablo de Olavide

    Sevilla, España

    ROR https://ror.org/02z749649

  2. 2 Universitat Pompeu Fabra
    info

    Universitat Pompeu Fabra

    Barcelona, España

    ROR https://ror.org/04n0g0b29

Revista:
Documentos de trabajo ( FEDEA )

ISSN: 1696-7496

Any de publicació: 2015

Número: 6

Pàgines: 1-46

Tipus: Document de treball

Altres publicacions en: Documentos de trabajo ( FEDEA )

Resum

Unemployment rates in developed countries recently reached levels not seen in a generation, and workers of all ages are facing increasing probabilities of losing their jobs and considerable losses in accumulated assets. These events have increased the reliance that most (older) workers have on public social insurance programs, exactly at a time that public finances are suffering from a large drop in contributions. Using administrative and household level data, we empirically characterize a Life-Cycle model of retirement and claiming decisions in terms of the employment, wage, health, and mortality uncertainty faced by individuals. We analyze the role of three intertwined factors in the recent evolution of work and retirement benefits claiming behavior in the United States; namely, higher unemployment uncertainty, higher unemployment benefits, and wealth shocks. We find that higher employment uncertainty reduces work and increases early claiming, while higher unemployment benefits mildly reduce work and reduce claiming at early ages. Finally, negative wealth shocks increase both early claiming and work. When all these factors are combined, the final outcome is a mild decline in labor supply and relatively little variation in early claiming.