Social security and the choice between full-time work, part-time work and retirement

This paper investigates the determinants of retirement decisions in the UK. To deal with the endogeneity bias introduced by the piecemeal linear budget constraint generated by the social security system, it specifies a utility function in income–leisure space and assumes that individuals maximise it over three discrete regimes: full-time work, part-time work, and retirement. Using maximum likelihood techniques, it estimates the utility function and quantifies the influence of pensions, wages and personal characteristics (age, health, status, etc.) on the probability of partial and complete withdrawal from the labour market.