Labor Supply of Retiring Couples and Heterogeneity in Household Decision-Making Structure

This paper analyzes the labor market participation behavior of retiring couples in Norway. To account for the unobserved heterogeneity in decision-making structure within the household, I formulate a mixed model by assuming there are two types of households, the cooperative type and the non-cooperative type. I assume that non-cooperative households behave according to a Stackelberg game with the male as the leader, while cooperative households engage in a cooperative bargaining process. The estimation results show that more than half of the households are of the non-cooperative type.*Part of this paper was written while I was working at Department of Economics, University of Oslo and the Ragnar Frisch Center for Economic Research. I would like to thank Eivind Bernhardsen, John K. Dagsvik, Erik Hernæs and Steinar Strøm for their insightful comments. I am grateful to two anonymous referees and the editor, Professor Shoshana Grossbard, for providing valuable comments that greatly improve this paper. Financial support from the Research Council of Norway (project 140082/530) is gratefully acknowledged. The usual disclaimer applies.