01 Sep 2004

Ageing Health and Retirement in Europe

Time Use, Health and Retirement

Hannu Piekkola / Liisa Leijola

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European Network of Economic Policy Research Institutes (ENEPRI) Research Report No. 3, 109 pages

This study examines time use and the incentives to retire that include both the value of paid and domestic work. This is accomplished by documenting the time used in unpaid household work in a group of EU countries. An economic value is assigned to this time, which is then used to calculate the income replacement rates and the option values for retirement. The study concludes that unpaid work and the possibilities for combining work and domestic life are very important in retirement decisions. The marginal value of non-paid work time has the highest impact in the retirement decision of men, especially among those in good health. Women in good health exhibit continuity of lifetime patterns and their domestic work supply does not increase substantially after retirement. Women in poor health are faced with a dual burden of work, which can explain their withdrawal from the workplace. The combination of these factors (i.e. the dual burden of work) encourages retirement. The policy implication is that economic incentives aimed at postponing retirement may fall short of expectations unless trends in time-use are properly taken into account.