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Abstract

Generous early retirement provisions account for a large proportion of the drop in the labor force participation of elderly workers. The aim of this paper is to provide a positive theory of early retirement. We suggest that the political support for generous early retirement provisions relies on: (i) the existence of a significant group of elderly workers with incomplete working history, who are not entitled to an old age pension; and (ii) the intragenerational redistribution built in this provision via the utility from leisure that induces low-ability workers to retire early. The majority which supports early retirement in a bidimensional voting game is composed of elderly with incomplete working history and low-ability workers; social security is supported by retirees and low-ability workers. (Copyright: Elsevier)

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File URL: http://dx.doi.org/10.1016/S1094-2025(02)00018-2
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Bibliographic Info

Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 6 (2003)
Issue (Month): 1 (January)
Pages: 12-36

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Handle: RePEc:red:issued:v:6:y:2003:i:1:p:12-36

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Related research

Keywords: Social security; Policy persistence; Structure-induced equilibrium;

Other versions of this item:

Find related papers by JEL classification:

• H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
• H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
• D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

References

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