Retirement and the Poverty of the Elderly: The Case of Portugal Paula Albuquerque * ISEG/SOCIUS/CISEP Manuela Arcanjo ISEG/SOCIUS Vítor Esc’aria ISEG/CIRIUS Francisco Nunes ISEG/UECE José Pereirinha ISEG/CISEP Technical University of Lisbon This article discusses whether transition to retirement may be associated with a greater probability of becoming poor. Having recourse to the European Community House- hold Panel (ECHP) for Portugal, the analysis is focused on a sample of individuals who retired in the period 1994-2001. Longitudinal analysis focuses upon income changes upon entering retirement. We relate the dynamics of household income changes for people who retire to personal and household characteristics. A multivari- ate probit model of the probability of low income at the time of retirement, conditional on not having a low income prior to retirement, is then put forward. Keywords: retirement, poverty dynamics, Portugal, old age social protection, in- come mobility JEL Codes: J26, J14, I32 Introduction Income level is the single most important factor impacting welfare, and the risk of loss of income represents the most serious concern of modern welfare states. Several events, among them withdrawal from the labour force, may trigger con- siderable decreases in income. Labour income accounts for the greatest share of household income for the countries of the European Union (EU), and in Portu- gal that percentage is among the highest: 59 per cent in 1996 (Heinrich, 2000). Therefore, given that withdrawal from the labour force requires a substitute for the * Address for correspondence: ISEG/SOCIUS/CISEP, Miguel Lúpi, 20, Room 604, 1249-078 Lisboa, Portugal E-mail: pcma@iseg.utl.pt 1