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Social Security And Early Retirement In An Overlapping-Generations Growth Model

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  • Philippe Michel

    (IUP and GREQAM)

  • Pierre Pestieau

    (CREPP
    CORE
    DELTA)

Abstract

This paper explains why workers retire earlier, and earlier at the same time as society becomes more and more indebted through increasing pay-as-you-go pension liabilities. To do so, we extend the standard twooverlapping-generations growth model to allow for endogenous labor participation in the later period of life. We show that the rate of participation declines as the size of social security system increases. We also show that mandatory early retirement many be socially desirable in case of underaccumulation.

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Bibliographic Info

Article provided by Society for AEF in its journal Annals of Economics and Finance.

Volume (Year): 14 (2013)
Issue (Month): 2 (November)
Pages: 723-737

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Handle: RePEc:cuf:journl:y:2013:v:14:i:3:michel:pestieau

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  1. Boskin, Michael J, 1977. "Social Security and Retirement Decisions," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 15(1), pages 1-25, January.
  2. Burbidge, John B., 1983. "Social security and savings plans in overlapping-generations models," Journal of Public Economics, Elsevier, Elsevier, vol. 21(1), pages 79-92, June.
  3. Hu, Sheng Cheng, 1979. "Social Security, the Supply of Labor, and Capital Accumulation," American Economic Review, American Economic Association, American Economic Association, vol. 69(3), pages 274-83, June.
  4. Weil, Philippe, 1987. "Love thy children : Reflections on the Barro debt neutrality theorem," Journal of Monetary Economics, Elsevier, Elsevier, vol. 19(3), pages 377-391, May.
  5. Feldstein, Martin S, 1974. "Social Security, Induced Retirement, and Aggregate Capital Accumulation," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 82(5), pages 905-26, Sept./Oct.
  6. Paul A. Samuelson, 1958. "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 66, pages 467.
  7. Kotlikoff, Laurence J & Summers, Lawrence H, 1979. "Tax Incidence in a Life Cycle Model with Variable Labor Supply," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 93(4), pages 705-18, November.
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Citations

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Cited by:
  1. Juan A. Lacomba & Francisco M. Lagos, 2009. "Reforming the retirement scheme: Flexible retirement vs. Legal retirement age," ThE Papers, Department of Economic Theory and Economic History of the University of Granada. 09/01, Department of Economic Theory and Economic History of the University of Granada..
  2. J. Ignacio Conde-Ruiz & Vincenzo Galasso & Paola Profeta, 2005. "The Evolution of Retirement," Working Papers, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University 278, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  3. Alvaro Forteza & Irene Mussio, 2011. "Assessing Redistribution in the Uruguayan Social Security System," Documentos de Trabajo (working papers), Department of Economics - dECON 1211, Department of Economics - dECON.
  4. de la Croix, David & Mahieu, Géraldine & Rillaers, Alexandra, 2000. "How should retirement policy adjust to the baby bust ?," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales), Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) 2001003, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  5. Alvaro Forteza, 2011. "Assessing Redistribution within Social Insurance Systems.The cases of Argentina, Brazil, Chile, Mexico and Uruguay," Documentos de Trabajo (working papers), Department of Economics - dECON 1311, Department of Economics - dECON.
  6. DE LA CROIX, David & MAHIEU, Géraldine & RILLAERS, Alexandra, . "How should the allocation of resources adjust to the baby bust?," CORE Discussion Papers RP, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) -1741, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  7. Gerhard Glomm & Juergen Jung & Chung Tran, 2006. "Macroeconomic Implications of Early Retirement in the Public Sector: The Case of Brazil," Caepr Working Papers, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington 2006-008, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington.
  8. Luca Gori & Mauro Sodini, 2011. "Nonlinear Dynamics in an OLG Growth Model with Young and Old Age Labour Supply: The Role of Public Health Expenditure," Computational Economics, Society for Computational Economics, Society for Computational Economics, vol. 38(3), pages 261-275, October.
  9. J. Ignacio Conde-Ruiz & Vincenzo Galasso & Paola Profeta, 2006. "Early Retirement and Social Security: A Long Term Perspective," CSEF Working Papers, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy 165, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  10. Luciano Fanti, 2012. "Consequences of a boost of mandatory retirement age on long run income and PAYG pensions," Discussion Papers, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy 2012/149, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  11. Vincenzo Galasso, 2012. "The Political Feasibility of Postponing Retirement," CESifo DICE Report, Ifo Institute for Economic Research at the University of Munich, Ifo Institute for Economic Research at the University of Munich, vol. 10(4), pages 27-31, December.
  12. Pedro Cardoso & Bernard M.S. van Praag, 2003. "How Sustainable Are Old-age Pensions in a Shrinking Population with Endogenous Labour Supply?," CESifo Working Paper Series, CESifo Group Munich 861, CESifo Group Munich.

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