Publication Date




Embargo Period


Degree Type


Degree Name

Doctor of Philosophy (PHD)


Economics (Business)

Date of Defense


First Committee Member

Salvador Ortigueira

Second Committee Member

Christopher Parmeter

Third Committee Member

David Kelly

Fourth Committee Member

Yader Lanuza


A simple life-cycle model suggests that a shock to assets inversely influences labor decisions for the retirement population. However, the literature finds weak and inconsistent evidence of this mechanism in the data. This paper proposes more accurate identifying assumptions to isolate this effect than is used in the previous literature and examines the retirement decision of near-retirement stockholders in the wake of a market crash using three episodes: the 2008 market crash, the 2000 downturn and market boom of the mid 90s. The treatment effect in a difference-in-differences setup is used to show that a sufficiently large stock market bust causes a retirement delay, but a boom incentivizes neither early nor earlier retirement. My findings show that shocks of both high intensity and duration are capable of engendering retirement delays. I present a structural model of retirement with varying labor costs and discount factors. I show that persons facing a negative market shock immediately before retirement delay retirement relative to a similar individual who faced no negative market shocks for a similar time period. Further, in line with the proposition of my previous paper, persons with high time preferences are less likely to delay retirement than persons with low time preferences. When facing a significant negative stock market shock immediately before retirement, investors delay retirement in order to recover wealth lost in the stock market via the labor market. However, when retirement is mandatory, investors are no longer able to recover lost wealth in this manner. Thus, this paper seeks to examine decision making and responses of agents facing negative asset shocks under mandatory retirement and examine welfare changes during retirement. I show that overall, savings rate increases in mandatory retirement and there is a decrease in consumption, labor force participation, wealth allocated to the risky asset and ultimately welfare. Labor participation decreases as each additional period of negative returns makes it less beneficial to increase labor, and wealth allocation to the risky asset increases with each additional period of negative returns to supplant the fall in labor.


Stock market; retirement; labor; mandatory; discretionary; welfare

Available for download on Thursday, July 29, 2021