Essays on Elderly Labor Force Participation, Pension Structure, and Partial Retirement

Increasingly, older Americans are postponing retirement or re-entering the workforce after retirement. This research examines the effect of pension structure changes and the different ways older workers partially retire by transitioning from full-time work to part-time work, by changing jobs, or by returning to work from full retirement. Defined contribution pension growth makes retirement wealth increasingly tied to financial markets, implying that older workers need to postpone retirement in recessions, precisely when jobs are scarce. Using data from the Health and Retirement Study, a difference-in-differences analysis comparing older workers with defined benefit and defined contribution pensions before and after the stock market crash in 2000 reveals that the probability of retirement for people aged 63-64 with only defined contribution pensions fell by over 34 percentage points from 1998 to 2002. As men and women work longer, partial retirement has become an important option for older workers. Studies suggest that workers in the private sector cannot work fewer hours as they age on their career job because defined benefit pensions restrict in-service distributions prior to the plan's normal retirement age. Using an instrumental variables regression, I find little evidence ERISA regulated defined benefit pensions cause partial retirees to change employers prior to attaining the normal retirement age. However, many older workers not affected by ERISA also change jobs in partial retirement, which suggests the presence of constraints not identified in the model or that changing employers is in itself desirable as people age. Although partial retirement usually refers to workers voluntarily transitioning from full-time work to complete retirement, health or financial problems may be causing these changes. I find partial retirees are less healthy than similar full-time workers and report their health constrains work ability. In addition, over 26% of partial retirees return to work after retirement and hourly wages of partial retirees (previously retired) fall substantially more than hourly wages of partial retirees who transitioned directly from full-time work. Regression analysis indicates retirees with defined benefit pensions rarely return to work. Women, though return to work if their spouse's health deteriorates, while men re-enter the workforce if their spouse works.