|Labor, Love and Leisure: Complementarity and the Timing of Retirement by Working Couples
|Year of Publication
|University of California, Berkeley (Dept. of Economics)
|Retirement Planning and Satisfaction
This paper develops and estimates a simple structural model for the joint determination of husband and wife retirement timing. I combine a standard lifecycle model with cooperative bargaining between spouses. Husbands and wives are assumed to have distince preferences between consumption and leisure, and to potentially value leisure more (or less) if their spouse is also retired. The model illustrates two mechanisms through which spouses' retirement decisions are interrelated: leisure complementarity and unequal decision-making power. The model is estimated using data for couples in the Health and Retirement Study who are both working at the start of the survey. The empirical results suggest that couples with greater leisure complementarity tend to retire together, or within a few years of each other. This effect is enhanced with the wife has greater decision-making power within the household. Relative to individualistic modles that ignore leisure complementarity and bargaining issues, the model provides a much better description of the actual distribution of joint retirement dates in the data.