Booms, busts and retirement timing

Abstract

This paper looks at the effect of asset prices and labour market conditions over the economic cycle on retirement timing in Great Britain. A priori, the effect of economic conditions is unclear; in an economic boom, positive wealth effects may induce earlier retirement but labour demand effects may work in the other direction. We exploit large variations in stock prices, local house prices, earnings and unemployment rates over the period 1991-2007 to identify which of the two effects prevails. We find little evidence that `wealth' effects influence retirement timing, but we do find significant effects of labour market conditions, with higher unemployment rates leading to earlier retirement.