Culture, financial constraints, and retirement decision

This paper investigates the interaction between cultural effects and financial constraints. I study how culture affects male labor supply near retirement before and after reforms that introduced early access to pension benefits. Variation in the cultural dimension arises from different cultural groups across state borders in Switzerland. Results show that the impact of culture over time follows changes in financial constraints resulting from the reforms. While individuals from the two cultural groups had identical labor force participation rates near retirement in 1970, they differ by almost three percent in 2000. I argue that the introduction of early access to pension benefits in the 1980s and 1990s loosened financial constraints and gave more room for culture to affect labor force participation.