Pension incentives and the joint retirement of couples: evidence from two natural experiments

Abstract

Recent reforms to social security in many countries have sought to delay retirement. Given the family context in which retirement decisions are made, social security reforms have potentially important spillover effects on the labour force participation of spouses. This paper analyses two complementary Australian natural experiments: (i) the 1993 Age Pension reform that increased the eligibility age for social security benefits for women and (ii) the Vietnam veterans pension and compensation schemes, whereby eligibility was conditional on conscription lotteries. We find important within-family spillover effects that are symmetric by gender and independent of whether pension coverage is expanded or withdrawn. Taking account of such within-family spillover effects is important for understanding the behavioural effects of pension programs and for reform impacts on social welfare.