Retirement Patterns in Europe: Evidence from SHARE

Agar Brugiavini22 November 2006

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Reddito e ricchezza personale

Parenti, vicini, condizioni abitative

Salute fisica e mentale, disabilità, mortalità

Processo dinamico

dati longitudinali

Politiche sociali

Dipartimento di Scienze Economiche – Università Ca’ Foscari di Venezia

SHARE: Survey of Health, Ageing and Retirement in Europe: „50+ in Europa“

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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,

***

Israel

SE

DK

IR

DE

CH

ATFR

SP IT

GR

BENL PL

CZ

UK

USA

Prima fase 2004: 27.000 individui

KoreaJapan

La salute in Europa

• 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?

Men

Women

Cosa abbiamo finoraImparato da SHARE

Salute e fattori socio-economici

Cosa abbiamo finoraImparato da SHARE

Chi ha meno istruzione o minor reddito ha maggiore probabilitàdi 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

Self-reported Economic Activity by Age

0.2

.4.6

.81

50 60 70 80 90age of respondent

employed retired allother

Self-reported Economic Activity by Age

9

Distribution of Economically Active Individuals by Gender and Age-class

0.2

.4.6

.81

SE DK DE NL BE FR CH AT ES IT GR

Women working

50-54 55-59 60-64 65+0

.2.4

.6.8

1SE DK DE NL BE FR CH AT ES IT GR

Men working

50-54 55-59 60-64 65+

10

0.2

.4.6

.81

50 55 60 65 70 75 80age of respondent

se nl dk be

Distribution of Retirees for Northern Countries

0.2

.4.6

.81

50 55 60 65 70 75 80age of respondent

at de fr ch

Distribution of Retirees for Mid-European Countries

0.2

.4.6

.81

50 55 60 65 70 75 80age of respondent

es it gr

Distribution of Retirees for Southern Countries

Distribution of Retirees

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Average Age Receiving a Pension for the First TimeWOMEN

0

10

20

30

40

50

60

70

SE DK DE NL BE FR CH AT ES IT GR

public and private old age and early retirement pension disability and invalidity/incapacity pension

MEN

0

10

20

30

40

50

60

70

SE DK DE NL BE FR CH AT ES IT GR

public and private old age and early retirement pension disability and invalidity/incapacity pension

12

Economic Activity and Physical Health

0.2

.4.6

SE DK DE NL BE FR CH AT ES IT GR

Economic activity of 'healthy' respondents

worker retired but work retired allother

0.2

.4.6

SE DK DE NL BE FR CH AT ES IT GR

Economic activity of 'functioning' respondents

worker retired but work retired allother

Prevalgono condizioni di lavoro di qualità media

Prevalgono condizioni di lavoro di qualità bassa

Prevalgono condizioni di lavoro di alta qualità

Importanza dell’ambiente di lavoro

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Retirement: a Relief or a Concern?

p

CH

DK

AT

DE NL

ESIT GR

BEFR

SE

Relief Concern Neither Both

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Reasons for Retirement - Women

WOMEN 60-64

0

10

20

30

40

50

60

70

80

90

100

SE DK DE NL BE FR CH AT ES IT GR

Eligible Early-preretirement Health-problems Enjoy life Other

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Reasons for Retirement - Men

MEN AGED 60-64

0

10

20

30

40

50

60

70

80

90

SE DK DE NL BE FR CH AT ES IT GR

Eligible Early-preretirement Health-problems Enjoy life Other

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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

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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).

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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.

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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

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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)

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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.

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Table 8. Probit Estimates - Marginal Effects (1) (2)

Respondent is male -0.138 -0.150(0.014) (0.016)

Respondent is married 0.172 0.171(0.021) (0.021)

Years of schooling -0.002 -0.002(0.001) (0.001)

(Age/10) -3.038(0.414)

(Age/10) squared 0.336(0.035)

Respondent is 60 0.019 0.475(0.024) (0.022)

Respondent is 65 0.151 0.551(0.037) (0.012)

SSWrel 0.062 0.070(0.002) (0.003)

IADL-index 0.016 0.018(0.002) (0.002)

age dummies yesinteraction dummies

(country*age) yes

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Table 8. Probit Estimates - Marginal Effects , cont (1) (2)

(0.027) (0.069)DK 0.078 0.231

(0.028) (0.053)NL -0.172 -0.162

(0.030) (0.071)BE 0.086 0.143

(0.034) (0.073)FR 0.102 0.104

(0.024) (0.056)CH -0.169 -0.175

(0.041) (0.103)AT 0.292 0.366

(0.016) (0.036)ES -0.080 0.017

(0.041) (0.089)IT 0.217 0.246

(0.020) (0.051)GR 0.192 0.355

(0.023) (0.040)age dummies yesinteraction dummies

(country*age) yes

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Table 9. Instrumental Variable Estimates - IV Probit

Coeff. M.E.

Respondent is male -0.256 -0.097(0.087)

Respondent is married 0.761 0.291(0.200)

Years of schooling 0.002 0.001 '(.003)

(Age/10) -11.049 -4.178( 2.137)

(Age/10) squared 1.074 0.406(0.189)

Respondent is 60 0.120 0.045(0.141)

Respondent is 65 0.074 0.028(0.186)

SSWrel 0.254 0.096(0.061)

IADL-index 0.087 0.033(0.026)

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Table 9. Instrumental Variable Estimates - IV Probit cont

Coeff. M.E.SE -0.268 -0.104

(0.129)DK 0.443 0.154

(0.164)NL -0.362 -0.141

(0.149)BE -0.071 -0.027

(0.188)FR 0.221 0.081

(0.136)CH -0.054 -0.021

(0.188)AT 0.573 0.192

(0.222)ES -0.262 -0.102

(0.195)IT 0.253 0.092

(0.171)GR 0.276 0.099

(0.231)

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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)