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The retirement behaviour of the self-employed in Britain

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We analyze the retirement behaviour of older self-employed workers, using a life cycle framework and a multinomial logit model of dynamic employment and retirement choices. Using data from the two-wave Retirement Survey, we find that greater actual or potential earnings decrease the probability of retirement among the self-employed. In contrast to employees, none of gender, health or family circumstances appear to affect self-employed retirement decisions. The dynamic analysis reveals that relatively few employees and virtually no retirees switch into self-employment in later life. The switches that do occur are motivated less by attempts to use self-employment as a bridge job or 'stepping stone' to full retirement, than by self-employment being a last resort for less affluent workers with job histories of weak attachment to the labour market. We compare self-employed and employee retirement behaviour and discuss the policy implications of our results.
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Document Type: Research Article

Affiliations: 1: Economics and Finance Department, Durham University, Durham DH1 3HY, UK 2: Department of Mathematics, University of Bristol, UK

Publication date: 2007-04-01

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