Xiaodong Fan, Ananth Sashadri and Christopher Taber
We develop and estimate a life-cycle model in which individuals make decisions about consumption, human capital investment, and labor supply. Retirement arises endogenously as part of the labor supply decision.
The model allows for both an endogenous wage process through human capital investment (which is typically assumed exogenous in the retirement literature) and an endogenous retirement decision (which is typically assumed exogenous in the human capital literature). We estimate the model using Indirect Inference to match the life-cycle profiles of wages and hours from the SIPP data.
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