Retirement and the Marginal Utility of Income

Pre-print, Working paper: The individual level of subjective well-being (SWB) has been shown to predict a number of future observable outcomes. Behaviour may however also be affected by the slope of SWB with respect to certain variables. We here use latentclass analysis to model both intercept and slope heterogeneity in the SWB-income relationship, and construct a continuous measure of the marginal utility of income. We show this marginal utility does predict future behaviour: those who value income more (who have a higher income elasticity of well-being) are less likely to retire. This correlation is found conditional on both the level of income and the level of well-being.

Author(s)

Andrew E. Clark, Yarine Fawaz

Date of publication
  • 2015
Keywords JEL
C35 I31
Keywords
  • Subjective Well-being
  • Retirement
  • Marginal Utility of Income
  • Latent Class Models
Internal reference
  • PSE Working Papers n° 2015-25
Version
  • 1