Xiaodong Fan
This article documents "sharp retirement" among white male workers in the United States - retirement accompanied by a discontinuous decline in labor supply. It then proposes and estimates a life-cycle model with habit persistence to explain such precipitous decline in labor supply upon retirement as workers quitting "cold turkey" to break the "work habit". Counterfactuals reveal heterogeneous responses from different retirement types.
In response to reducing Social Security benefits by 20%, individuals choosing sharp retirement respond mostly on the extensive margin by delaying retirement eight months, while individuals retire smoothly respond mostly on the intensive margin by increasing yearly labor supply and delaying retirement only one month. Comparison shows the work habit model produces more empirically plausible results than other approaches.
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