Labour force behaviour of men and women in elderly two-adult households: evidence from EU countries

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This paper studies the effect of individual and spousal characteristics on the labour force participation of individuals living in elderly two-adult households. The comparative approach taken here studies men and women separately and uses the first eight waves (1994-2001) of the European Community Household Panel (ECHP). We compare results of three countries: Finland (a country with a high degree of women's labour force participation), Belgium and Germany (countries where women's labour force participation is relatively low). Results of multinomial logit model estimations suggest that are substantive differences between countries as well as between the behaviour of men and women across the various channels out of employment. We find evidence that a wife exerts a stronger influence on a husband's retirement decision. One explanation for this may be found in asymmetric complementarities of leisure - a husband's enjoyment of non-employment may depend much more on his wife also being non-employed than vice versa. There is evidence that the complementarities of leisure hypothesis dominates the hypothesis concerning the added worker (where the labour supply of one spouse increases when the other spouse's income is reduced or disappears). These results are in line with evidence from the US and have some important implications: simulations of the effect of changes in the pension system on men's retirement may yield incorrect answers if spillover effects are ignored.