Private wealth and job exit at older age: a random effects model

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IZA Seminar

Place: Schaumburg-Lippe-Str. 9, 53113 Bonn

Date: 30.03.2010, 12:00 - 13:30

   

Presentation by 

Hans Bloemen (Vrije Universiteit Amsterdam)
   

Abstract:

Private wealth holdings are likely to become an increasingly important determinant in the job exit decision of elderly workers. Net wealth may correlate with worker’s characteristics that also determine the exit out of a job. It is therefore important to include a rich set of observed characteristics in an empirical model for retirement in order to measure the (marginal) effect of wealth on the job exit rate. But even with a rich set of regressors the question remains whether there are unobservable worker’s characteristics that affect both net wealth and the job
exit rate. We specify a simultaneous equations model for job exit transitions with multiple destinations, net wealth, and the initial labour market state. The job exit rates and the net wealth equation contain random effects. We allow for correlation between the random effects of job exit and net wealth, and the initial labour market state. As instruments for wealth, we use survey information that measures ‘shocks’, like shocks to the household’s financial situation during the previous year.

   
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