The objective of the thesis is to measure the impact of the Global Financial Crisis on the retirement of workers in Australia. Contrary to the previous research that used the 1990s stock market boom in the US as a natural experiment, in this thesis, we use the 2009 Global Financial Crisis that provides another natural experiment to explore the retirement behavior after a negative shock on older worker’s superannuation wealth.
Since the amount of superannuation wealth is not directly observable in the years we are interested in, we separate individuals into two groups to identify the effect of negative wealth shock on retirement. One group consists of individuals with an accumulation superannuation fund whose wealth should have been impacted by the shock (the treatment group). The other group is made up of individuals with a defined benefit superannuation fund whose wealth should not been affected (the control group). The retirement probabilities of the two groups are compared in order to measure the effect of the wealth shock on retirement.
Our result shows that individuals with an accumulation superannuation fund, who was supposed to see a decrease in superannuation wealth, saw a lower probability of retirement compared to individuals with a defined benefit superannuation fund. However, the difference of the two groups’ retirement probability is -0.407%. This result implies the negative shock on superannuation wealth has a negligible effect on the worker’s retirement in Australia.