Signals matter? Large retirement responses to limited financial incentives

Do early retirement ages (ERA) provide a signal about the appropriate age to retire? We examine the impact of increasing the ERA for women in a context (the UK) where the financial incentive to retire at the ERA is very limited. Despite limited financial incentives, we find that women's employm...

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Bibliographic Details
Published in:Labour economics 2016-10, Vol.42, p.203-212
Main Authors: Cribb, Jonathan, Emmerson, Carl, Tetlow, Gemma
Format: Article
Language:English
Subjects:
Early retirement age
Labour supply
Retirement
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Summary:Do early retirement ages (ERA) provide a signal about the appropriate age to retire? We examine the impact of increasing the ERA for women in a context (the UK) where the financial incentive to retire at the ERA is very limited. Despite limited financial incentives, we find that women's employment rates at the old ERA increased by 6.3 percentage points. Our results suggest that wealth effects, credit constraints and changes to marginal financial incentives to work do not drive this effect but instead that most of the excess retirements observed at the ERA are driven by a signal to retire. •Increase in the ERA led to female employment at ages 60 and 61 rising by 6.3ppts.•Large effect on employment despite very limited financial incentives to retire at ERA.•This large effect is most likely driven by a signal to retire at the ERA•The proportion of women aged 60 who are unemployed increased by 1.2ppts.•ERA explained most (3 in 4) of the excess retirements for women aged 60 before 2010.
ISSN:0927-5371
1879-1034
DOI:10.1016/j.labeco.2016.09.005