TY  - JOUR
AU  - Rust,John
TI  - A Dynamic Programming Model of Retirement Behavior
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 2470
PY  - 1987
Y2  - December 1987
UR  - http://www.nber.org/papers/w2470
L1  - http://www.nber.org/papers/w2470.pdf
N1  - Author contact info:
John P. Rust
Department of Economics
University of Maryland
3105 Tydings Hall
College Park, MD  20742
Tel: 301/405-3489
Fax: 301/405-3542
E-Mail: jrust@gemini.econ.umd.edu
M1  - published as John P. Rust. "A Dynamic Programming Model of Retirement Behavior," in David A. Wise, editor, "The Economics of Aging" University of Chicago Press (1989)

M2  - featured in NBER digest on 1988-04-01
AB  - This paper formulates a model of retirement behavior based on the solution to a stochastic dynamic programming problem. The workers objective is to maximize expected discounted utility over his remaining lifetime. At each time period the worker chooses how much to consume and whether to work full-time, part-time, or exit the labor force. The model accounts for the sequential nature f the retirement decision problem, and the role of expectations of uncertain future variables such as the worker's future lifespan, health status, marital and family status, employment status, as well as earnings from employment, assets, and social security retirement, disability and medicare payments. This paper applies a "nested fixed point" algorithm that converts the dynamic programming problem into the problem of repeatedly recomputing the fixed point to a contraction mapping operator as a subroutine of a standard nonlinear maximum likelihood program. The goal of the paper is to demonstrate that a fairly complex and realistic formulation of the retirement problem can be estimated using this algorithm and a current generation supercomputer, the Cray-2.
ER  -