Essays on Labor Market Attachment and Retirement Behavior of the Elderly

This dissertation evaluates the labor market behavior and benefit claiming of the elderly. In particular, I explore the impact of socio-economic factors, changes in public policy, and economic recessions on retirement and social security benefit claiming. The goal of my research is to document the differences across cohorts in Labor Force Participation (LFP) and retirement decisions, and to determine whether the factors mentioned above can account for the observed difference in behavior across cohorts. In the first part of my thesis, I study the differences in Labor Force Participation (LFP) and retirement behavior of men and women between the ages of 55 and 67 for each of the four existing cohorts of the Health and Retirement Study (HRS). A comprehensive descriptive analysis and duration analysis reveals that, among men, the recent cohorts (the EBB and MBB) participate less in the labor market at each age than did the older cohorts (the HRS and WB) when LFP is defined as working at least 300 hours a year. However, no significant cohort LFP differences appear between the cohorts of women. Education and access to Employer Sponsored Health Insurance (ESHI) are strongly associated with these cohort-based differences. In addition, Estimation results demonstrate substantial and significant lower labor market exit hazards for members of the EBB and MBB cohorts, in all specifications and all else equal. In the second part of my thesis, I utilize a computational overlapping generations model of heterogeneous individuals in order to model economic decision-making and simulate the effects of the Great Recession and cohort-specific factors on LFP. Simulation of the model for EBB cohorts indicates that the changes in cohort specific factors such as education could explain the overall higher attachment to labor market in the younger cohort. On the other hand, the transition path to steady state in response to recession modeled as unexpected productivity and asset shocks, also reveals that households decrease their labor supply.

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