Retirement of the self-employed in the Netherlands

Abstract

We investigate retirement decisions of the self-employed in the Netherlands using administrative data. We focus on the time period around which individuals reach the statutory retirement age (SRA, 65 years in most cases). After the statutory retirement age, each Dutch resident receives the Old Age State Pension annuity (AOW), providing an income at the subsistence level. Both the timing and the magnitude of this state pension are well known in advance. According to a standard leisure/consumption trade-off life cycle model, receiving AOW should therefore have no impact on labour supply choices. While employees often face the demand side restriction of mandatory retirement, this does not apply to the self-employed. We investigate whether retirement and earnings of the self-employed change at the SRA and whether any such changes vary with, e.g., the level of financial wealth. We find a peak in retirement when self-employed reach the SRA. The evidence suggests that the benchmark of retiring at 65 is acting as a driver, due to behavioural features like anchoring or a social norm.

Prolonged Worklife Among Grandfathers: Spillover Effects on Grandchildren'S Educational Outcomes

“…Prior evidence has shown that households are very responsive to the (change in) institutional retirement ages which causes discontinuous retirement probabilities right before and after reaching the retirement age (see, among others, Duggan et al (2007)). Such evidence of responsiveness to the statutory retirement age is also found for the Netherlands in recent papers by Atav et al (2021) and Nagore Garcia et al (2021). For a more extensive discussion on the discontinuity, we refer to Been and Goudswaard (2021).…”

Longer Careers: A Barrier to Hiring and Coworker Advancement?

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