Journal Article

Housing Wealth and Retirement Timing

Martin Farnham and Purvi Sevak

in CESifo Economic Studies

Volume 62, issue 1, pages 26-46
Published in print March 2016 | ISSN: 1610-241X
Published online July 2015 | e-ISSN: 1612-7501 | DOI: https://dx.doi.org/10.1093/cesifo/ifv015
Housing Wealth and Retirement Timing

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  • Demand and Supply of Labour
  • Household Behaviour and Family Economics
  • Macroeconomics: Consumption, Saving, Production, Employment, and Investment
  • Housing Markets, Production Analysis, and Business Location

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Labor-supply effects of changes in house value are potentially important but empirically neglected. Using the panel Health and Retirement Study merged to local house prices from the Federal Housing Finance Agency, we estimate the effect of house-price changes on actual and planned retirement timing. While we find no effect of house-price changes on the annual probability of retiring, we find that people respond to rising house prices by revising down their expected retirement age. We estimate that a 10% real increase in house value reduces expected retirement age by about 4 months. Our findings suggest that movements in the housing market may have important labor supply implications, especially in areas experiencing steep price declines.

Keywords: D12; E21; J26; R31; retirement; wealth effect; housing; house prices

Journal Article.  9360 words.  Illustrated.

Subjects: Demand and Supply of Labour ; Household Behaviour and Family Economics ; Macroeconomics: Consumption, Saving, Production, Employment, and Investment ; Housing Markets, Production Analysis, and Business Location

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