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A One‐Sector Neoclassical Growth Model With Endogenous Retirement

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  • KIMINORI MATSUYAMA

Abstract

This paper extends Diamond's overlapping generations model by allowing the agents to make the retirement decision. Earning a higher wage income when young not only enables the agents to save more. It also induces more agents to retire early and gives an additional incentive to save more for retirement. This leads to a higher capital–labour ratio in the following period and hence the next generation of agents earns a higher wage income when young. Due to this positive feedback mechanism, endogenous retirement magnifies the persistence of growth dynamics and even generates multiple steady‐states for empirically plausible parameter values.

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  • Kiminori Matsuyama, 2008. "A One‐Sector Neoclassical Growth Model With Endogenous Retirement," The Japanese Economic Review, Japanese Economic Association, vol. 59(2), pages 139-155, June.
    • Handle: RePEc:bla:jecrev:v:59:y:2008:i:2:p:139-155
    DOI: 10.1111/j.1468-5876.2008.00421.x
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    References listed on IDEAS

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    Cited by:

    1. Yusuke Miyake & Masaya Yasuoka, 2018. "Subsidy Policy and Elderly Labor," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 4(2), pages 331-347, July.
    2. Iong, Ka-Kit & Irmen, Andreas, 2021. "The supply of hours worked and fluctuations between growth regimes," Journal of Economic Theory, Elsevier, vol. 194(C).
    3. Aisa, Rosa & Larramona, Gemma & Pueyo, Fernando, 2013. "Preventive health and active ageing: the elderly are not a burden," MPRA Paper 52955, University Library of Munich, Germany.
    4. Hirono, Makoto & Mino, Kazuo, 2019. "Pension, Retirement, and Growth in the Presence Heterogeneous Elderly," MPRA Paper 98096, University Library of Munich, Germany.
    5. Mizuno, Masakatsu & Yakita, Akira, 2013. "Elderly labor supply and fertility decisions in aging-population economies," Economics Letters, Elsevier, vol. 121(3), pages 395-399.
    6. Klaus Prettner & David Canning, 2014. "Increasing life expectancy and optimal retirement in general equilibrium," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 56(1), pages 191-217, May.
    7. Rosa Aísa & Fernando Pueyo & Marcos Sanso, 2012. "Life expectancy and labor supply of the elderly," Journal of Population Economics, Springer;European Society for Population Economics, vol. 25(2), pages 545-568, January.
    8. Aisa, Rosa & Larramona, Gemma & Pueyo, Fernando, 2015. "Active aging, preventive health and dependency: Heterogeneous workers, differential behavior," Journal of Economic Behavior & Organization, Elsevier, vol. 117(C), pages 1-9.
    9. Tran, Quang-Thanh, 2022. "The aging tax on potential growth in Asia," Journal of Asian Economics, Elsevier, vol. 81(C).
    10. Yoshitaka Koda & Manachaya Uruyos, 2015. "Altruism and four shades of family relationships," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 5(2), pages 345-365, December.
    11. Minoru Watanabe & Masaya Yasuoka, 2021. "Elderly Labour and Unemployment," Journal of Interdisciplinary Economics, , vol. 33(2), pages 200-214, July.
    12. Hirazawa, Makoto & Yakita, Akira, 2017. "Labor supply of elderly people, fertility, and economic development," Journal of Macroeconomics, Elsevier, vol. 51(C), pages 75-96.
    13. Hirono, Makoto & Mino, Kazuo, 2020. "Pension Reforms, Population Aging, and Retirement Decision of the Elderly in a Neoclassical Growth Model," MPRA Paper 102467, University Library of Munich, Germany.
    14. Cipriani, Giam Pietro & Fioroni, Tamara, 2021. "Endogenous Demographic Change, Retirement, And Social Security," Macroeconomic Dynamics, Cambridge University Press, vol. 25(3), pages 609-631, April.
    15. Masaya Yasuoka, 2019. "Elderly Labor and Precautionary Saving," Discussion Paper Series 193, School of Economics, Kwansei Gakuin University.

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