TY  - JOUR
AU  - Gordon,Roger H.
AU  - Blinder,Alan S.
TI  - Market Wages, Reservation Wages, and Retirement Decisions
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 513
PY  - 1980
Y2  - July 1980
UR  - http://www.nber.org/papers/w0513
L1  - http://www.nber.org/papers/w0513.pdf
N1  - Author contact info:
Roger H. Gordon
Department of Economics 0508
University of California, San Diego
9500 Gilman Drive, Dept. 0508
La Jolla, CA 92093
Tel: 858/534-4828
Fax: 858/534-7040
E-Mail: rogordon@ucsd.edu

Alan S. Blinder
Department of Economics
Princeton University
Princeton, NJ 08544-1021
Tel: 609/258-3358
Fax: 609/258-5398
E-Mail: blinder@princeton.edu
M1  - published as Roger H. Gordon, Alan S. Blinder. "Market wages, reservation wages, and retirement decisions," in Anthony Atkinson and David F. Bradford, organizers, "Econometric Studies in Public Finance" Journal of Public Economics, Vol. 14, no. 2 (Elsevier Sequoia S. A.) (1980)

AB  - The paper is an empirical cross-section study of the retirement decisions of American white men between the ages of 58 and 67. predicated on the theoretical notion that an individual retires when his reservation wage exceeds his market wage. Reservation wages are derived from an explicit utility function in which the most critical taste parameter is assumed to vary both systematically and randomly across individuals. Market wages are derived from a standard wage equation adjusted to the special circumstances of older workers. The two equations are estimated jointly by maximum likelihood, which takes into account the potential selectivity bias inherent in the model (low-wage individuals tend to retire and cease reporting their market wage). The model is reasonably successful in predicting retirement decisions, and casts serious doubt on previous claims that the social security system induces many workers to retire earlier than they otherwise would. The normal effects of aging (on both market and reservation wages) and the incentives set up by private pension plans are estimated to be major causes of retirement.
ER  -