Pathways to Retirement in Australia: Evidence From the HILDA Survey

Abstract

Using data from the first 8 waves of the Household Income and Labour Dynamics in Australia (HILDA) Survey, this article adds to existing knowledge of how pathways to retirement are decided. Two complementary estimation strategies are used to model the labor force transitions of mature age men and women. First, a standard multinomial logit model is used to determine the characteristics associated with specific patterns of labor force participation. Second, a dynamic mixed multinomial logit model is used to estimate labor market states in each year. Both approaches provide new evidence about coordinated retirement among mature age couples, not only in the timing of retirement but how the transition to retirement is made. The results also provide new evidence about the different effects of specific components of household wealth on how the transition to retirement is made. Controlling for unobserved heterogeneity in the dynamic multinomial model confirms the existence of true state dependence in the labor force states of mature age men and women. This implies that policies aimed at encouraging older workers to delay retirement will be more effective in boosting mature age participation than policies aimed at encouraging older workers back into the workforce after a period of nonparticipation.