Retirement Patterns in Europe: Evidence from SHARE

1. Retirement Patterns in Europe: Evidence from SHARE Agar Brugiavini 22 November 2006

2. Dipartimento di Scienze Economiche – Università Ca’ Foscari di Venezia SHARE: Survey of Health, Ageing and Retirement in Europe: „50+ in Europa“ Reddito e ricchezza personale  Politiche sociali Processo dinamico  dati longitudinali Parenti, vicini, condizioni abitative Salute fisica e mentale, disabilità, mortalità

3. Dipartimento di Scienze Economiche – Università Ca’ Foscari di Venezia SHARE è un indagine condotta contemporaneamente in numerosi Paesi europei: 11 nel 2004, 14 nel 2006. E’ finanziata prevalentemente dall’Unione Europea, ma anche dal National Institute of Aging americano Raccoglie informazioni su salute, rapporti interpersonali, reddito ed aspettative degli individui sopra i cinquanta anni di età – E SEGUE QUESTI INDIVIDUI NEL TEMPO! Il coordinatore europeo è Axel Börsch-Supan,

4. * Korea Japan * * Israel SE UK DK IR NL PL DE USA BE CZ FR CH AT IT SP GR Prima fase 2004: 27.000 individui

5. Men Women La salute in Europa Cosa abbiamo finora Imparato da SHARE • Molti sono in buona salute:uomini 60.5% buona o molto buona; • donne 52.5%Un terzo degli ultra-ottantenni non ha problemi di salute o malattie croniche! • Abbiamo misurato la salute in tanti modi diversi – anche con test fisici • Perché queste differenze fra Nord e Sud Europa? Reddito? Servizi sanitari? Stili diversi di risposta?

6. Salute e fattori socio-economici Cosa abbiamo finora Imparato da SHARE Chi ha meno istruzione o minor reddito ha maggiore probabilità di essere in cattiva salute

7. Dipartimento di Scienze Economiche – Università Ca’ Foscari di Venezia • Il modulo EP (Employment and Pensions) in SHARE • Posizione nel mercato del lavoro (self-reported), ma • poi si chiede se ha lavorato nell’ultimo mese • Ai lavoratori: tutte le info sul lavoro corrente (inclusi • redditi, soddisfazione etc..) • Ai pensionati o disoccupati: info sui redditi e sul “past • job”. Motivi di uscita dal mercato del lavoro • A tutti: redditi attesi da pensione

8. Self-reported Economic Activity by Age

9. Distribution of Economically Active Individuals by Gender and Age-class

10. Distribution of Retirees

11. Average Age Receiving a Pension for the First Time

12. Economic Activity and Physical Health

13. Importanza dell’ambiente di lavoro Prevalgono condizioni di lavoro di alta qualità Prevalgono condizioni di lavoro di qualità media Prevalgono condizioni di lavoro di qualità bassa

14. Retirement: a Relief or a Concern? p

15. Reasons for Retirement - Women

16. Reasons for Retirement - Men

17. Motivation for econometric model • Retirement (and labor force participation) decisions may depend on a number of factors, including health • On top of individual determinants (preferences and socio-economic conditions) take into account the role of institutions

18. Theoretical Framework Following Grossman (1972a, 1972b, 2000) and Currie and Madrian (2000), assume individuals derive utility from consumption, leisure and also, directly from health. They maximize the following intertemporal utility function. Implications: • Health is valued by individuals both for its own sake and because being sick is assumed to take time away from market and non-market activities. • The stock of health today depends on past investments in health. • Non-market time is an input into both health production and the production of other valued non-market goods (e.g., leisure activities).

19. Theoretical Framework • Hence individuals maximize utility taking into account the investment in health (optimal path for marginal product of health capital) • This model can be solved to yield a conditional labor supply function in which labor supply depends on the endogenous health variable • From an empirical point of view, the main implication of the model is that health must be treated as an endogenous choice.

20. Econometric Evidence • Model probability of being retired derived from FOC • Probability [being Retired] • Dependent variable: • Retired indicator = 1 if (self-reported as) currently retired • 0 otherwise • Sample: Workers and Pensioners - Aged 50-70 • IV-probit • First show Probit analysis – then show IV-Probit • Note: country-age and country*age variability does not exhaust explanatory power of other variables

21. Econometric Evidence • Basic regressors common to all models • With country dummies (Germany dummy omitted) • Measure of Social Security Wealth (SSW): SSWREL: SSW/total household income • IADL Index for health (cumulative number of failures in instrumental activities and activities of DL)

22. Econometric Evidence • Instrumental variables • Social Security Wealth (SSW) Instrumented with occupational indicators • IADL – index In line with the theory highlighted we make use for IADL of retrospective questions (“ever smoked”, “ever been depressed”, age of parents at death or if parent survived a target age), material inputs for health (vigorous physical activity) plus subjective survival probability.

27. Conclusions • Importance of various determinants of retirement • Social Security Wealth and health still relevant after including a whole battery of dummies; still of the expected sign after making use of IV, i.e. importance of institutions, even after controlling for other factors • In the future: model labor supply (hours of work)