Evidence from different sources shows that spouses' retirement decisions are correlated. Retirement policies affecting individuals in couples are therefore also likely to affect behavior of their spouses. It is therefore important to account for joint features in modeling retirement. This paper studies a structural collective model of labor supply and retirement of both partners in a couple with interdependent preferences, imperfect knowledge of preferences of the spouse, and subjective expectations about the future. We propose a novel method to estimate preferences and the intra-household bargaining process, which relies on stated preferences data collected in the Health and Retirement Study. Respondents were asked to choose between hypothetical retirement trajectories describing the retirement ages and replacement rates of both spouses from three perspectives: considering their own preferences only, the preferences of their spouse only, or the most likely decision for the household. With these data, all model parameters are identified and potential sources of joint retirement can be disentangled. We find that males misperceive their wives' preferences, overestimating their disutility of work. Our estimates correct for this bias. They suggest that correlation in unobserved heterogeneity components of the partners' marginal utility of leisure explains a large share of joint retirement decisions. We also find significant positive complementarities in leisure, but this explains a much smaller part of joint retirement.

Using a general equilibrium heterogeneous agent model featuring health production, we quantify the relative contribution of price distortions in the health market, TFP and other health risks in explaining cross-country differences in health expenditure (as a share of GDP) and health status. Estimated parameters reveal a substantial price wedge that explains at most 20% of the difference in health spending (as a share of GDP) and 30% of the difference in health status between Europe and the U.S. We estimate a one percentage point negative impact on the life-time cost-of-living of Americans from higher prices due to inefficiencies.

The authors formulate a stylized structural model of health, wealth accumulation and retirement decisions building on the human capital framework of health provided by Grossman. They explicitly assume a functional form of the utility function and carefully account for initial conditions, which allow them to derive analytic solutions for the time paths of consumption, health, health investment, savings and retirement. They argue that the Grossman literature has been unnecessarily restrictive in assuming that health is always at Grossman's "optimal" health level. Exploring the properties of corner solutions they find that advances in population health (health capital) can explain the paradox that while population health and mortality have continued to improve in the developed world, retirement ages have continued to fall with retirees pointing to deteriorating health as an important reason for early retirement. They find that improvements in population health decrease the retirement age, while at the same time individuals retire when their health has deteriorated. In their model, workers with higher human capital (say white collar workers) invest more in health and because they stay healthier retire later than those with lower human capital (say blue collar workers) whose health deteriorates faster. Plausibly, most individuals are endowed with an initial stock of health that is substantially greater than the level required to be economically productive.

Evidence from different sources shows that spouses' retirement decisions are correlated. Retirement policies affecting individuals in couples are therefore also likely to affect behavior of their spouses. It is therefore important to account for joint features in modeling retirement. This paper studies a structural collective model of labor supply and retirement of both partners in a couple with interdependent preferences, imperfect knowledge of preferences of the spouse, and subjective expectations about the future. We propose a novel method to estimate preferences and the intra-household bargaining process, which relies on stated preferences data collected in the Health and Retirement Study. Respondents were asked to choose between hypothetical retirement trajectories describing the retirement ages and replacement rates of both spouses from three perspectives: considering their own preferences only, the preferences of their spouse only, or the most likely decision for the household. With these data, all model parameters are identified and potential sources of joint retirement can be disentangled. We find that males misperceive their wives' preferences, overestimating their disutility of work. Our estimates correct for this bias. They suggest that correlation in unobserved heterogeneity components of the partners' marginal utility of leisure explains a large share of joint retirement decisions. We also find significant positive complementarities in leisure, but this explains a much smaller part of joint retirement.