Research
Job Market Paper:
Most people are mistaken about their pension provision implying significant informational frictions. This paper introduces such frictions, a cost of attention to an uncertain pension policy, into a life-cycle model of retirement. Resulting endogenous mistaken beliefs help explain why labour market exits concentrate at official retirement ages despite weak incentives to do so, and the UK female state pension age (SPA) reform provides policy variation. Solving this dynamic rational inattention model with endogenous heterogeneous beliefs represents a significant methodological contribution in itself. Costly attention improves model predicted employment response to the SPA whilst explaining patterns in the belief data. An extension addresses another puzzle, the low take-up of actuarially advantageous deferral options.