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American Economic Review: Vol. 101 No. 3 (May 2011)

AER Volume. 101, Issue 3 | Previous ArticleNext Article

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Time to Retire? The Effect of State Fiscal Policies on Retirement Decisions

Article Citation

Gurley-Calvez, Tami, and Brian Hill. 2011. "Time to Retire? The Effect of State Fiscal Policies on Retirement Decisions." American Economic Review, 101(3): 35-39.

DOI: 10.1257/aer.101.3.35

Abstract

Our research addresses the importance of state fiscal policies on the probability of retirement using a panel of individual tax return data. Results indicate that a one percentage point increase in the income or sales tax rate reduces the probability of retirement by about 8.7 percent. The evidence suggests that state spending might also affect retirement decisions but magnitudes are inconclusive. In general, the results suggest that the income effect dominates; that is, higher tax rates at the state-level reduce disposable income and decrease the probability of retiring. Results are similar in models examining single and married filers separately.

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Authors

Gurley-Calvez, Tami (WV U)
Hill, Brian (Salisbury U)

JEL Classifications

D12: Consumer Economics: Empirical Analysis
H71: State and Local Taxation, Subsidies, and Revenue
H72: State and Local Budget and Expenditures
J26: Retirement; Retirement Policies