We estimate a model of labor supply and retirement of partners in a couple, modelling interdependent preferences; imperfect knowledge of the spouse’s preferences; and subjective expectations about the future. We rely in a new way on data collected in the U.S. Health and Retirement Study. Respondents were asked to choose between hypothetical retirement trajectories describing the retirement ages and income replacement rates of both spouses, considering 1) their own preferences only; 2) the preferences of their spouse only; or 3) the most likely decision for the household. We find that males overestimate their wives’ dislike of work. Our estimates correct for this, and suggest that correlation in unobserved sources of partners’ appreciation for leisure explains a large share of joint retirement decisions. We also find complementarities in leisure time itself, but this explains a much smaller part of joint retirement.
Publication Authors: Pierre-Carl Michaud, Arthur Van Soest and Luc Bissonnette
*Scientific Publication: Journal of Economic Behavior & Organization