Determinants of Labour Supply at Older Ages: A Theoretical and Empirical Approach.

An ageing population is a common feature shared amongst developed economies. Increasing longevity has significant implications for fiscal expenditure, pensions and the welfare state. Therefore, research investigating the determinants of labour supply at older ages is of paramount importance. To understand labour supply behaviour from a theoretical perspective, in chapter one we turn to a lifecycle framework, in which not only labour supply but saving and consumption behaviour are also modelled. By analytically solving the model, we are able to understand its general properties and what implications these have for optimal within period decisions. In chapter two we show how state pension deferral can be modelled within a general lifecycle framework and the effect it may have on labour supply. We demonstrate the size of this effect using a numerical simulation and also compare the generosity of the two deferral options available under UK legislation. To investigate the determinants of labour supply from an empirical perspective, we use a duration approach to model a variety of standard and non-standard retirement paths. In chapter three we pay attention to the way in which an individual's labour force history may affect their retirement decision. In chapter four we determine which factors are more likely to lead to an individual returning to work conditional on having retired, and the typical characteristics of an `unretirement job'. In both chapters we show that; age, pension wealth, education and spousal employment characteristics are important factors in determining labour force transitions at older ages. The final two chapters are concerned with survey methodology. Chapter five shows the importance of longitudinal survey weights in appropriately controlling for attrition in the UK Labour Force Survey (UKLFS). We demonstrate this by comparing estimated labour market flows under existing and revised weights. Chapter six highlights the extent of seasonality in UKLFS flows and shows that adjusting for seasonality provides an improved understanding of the underlying dynamics in the UK labour market.