Private Wealth and Job Exit at Older Age : A Random Effects Model

Private wealth holdings are likely to become an increasingly important determinant in the jobexit decision of elderly workers. Net wealth may correlate with worker’s characteristics thatalso determine the exit out of a job. It is therefore important to include a rich set of observedcharacteristics in an empirical model for retirement in order to measure the (marginal) effectof wealth on the job exit rate. But even with a rich set of regressors the question remainswhether there are unobservable worker’s characteristics that affect both net wealth and thejob exit rate. We specify a simultaneous equations model for job exit transitions with multipledestinations, net wealth, and the initial labour market state. The job exit rates and the netwealth equation contain random effects. We allow for correlation between the random effectsof job exit and net wealth, and the initial labour market state.