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Early Retirement

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Author Info

  • J. Ignacio Conde-Ruiz

    (FEDEA and Universitat Pompeu Fabra)

  • Vincenzo Galasso

    (Universita Bocconi and IGIER)

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;

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References

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  1. P. A. Diamond & J. A. Mirrlees, 1977. "A Model of Social Insurance With Variable Retirement," Working papers 210, Massachusetts Institute of Technology (MIT), Department of Economics.
  2. Conde-Ruiz, J.I. & Galasso, V., 2000. "Positive Arithmetic of the Welfare State," Economics Working Papers eco2000/23, European University Institute.
  3. Lazear, Edward P, 1979. "Why Is There Mandatory Retirement?," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1261-84, December.
  4. Ricardo J. Caballero & Mohamad L. Hammour, 1998. "The Macroeconomics of Specificity," Journal of Political Economy, University of Chicago Press, vol. 106(4), pages 724-767, August.
  5. Stephen Coate & Stephen Morris, . ""Policy Persistence ''," CARESS Working Papres 95-19, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences.
  6. Tabellini, Guido, 2000. " A Positive Theory of Social Security," Scandinavian Journal of Economics, Wiley Blackwell, vol. 102(3), pages 523-45, June.
  7. Krusell, Per & Quadrini, Vincenzo & Rios-Rull, Jose-Victor, 1997. "Politico-economic equilibrium and economic growth," Journal of Economic Dynamics and Control, Elsevier, vol. 21(1), pages 243-272, January.
  8. John Hassler & José V. Rodríguez Mora & Kjetil Storesletten & Fabrizio Zilibotti, 2003. "The Survival of the Welfare State," American Economic Review, American Economic Association, vol. 93(1), pages 87-112, March.
  9. Michele Boldrin & Juan J. Dolado & Juan F. Jimeno & Franco Peracchi, 1999. "The future of pensions in Europe," Economic Policy, CEPR & CES & MSH, vol. 14(29), pages 287-320, October.
  10. Galasso, Vincenzo & Profeta, Paola, 2002. "The political economy of social security: a survey," European Journal of Political Economy, Elsevier, vol. 18(1), pages 1-29, March.
  11. Azariadis, Costas & Galasso, Vincenzo, 2002. "Fiscal Constitutions," Journal of Economic Theory, Elsevier, vol. 103(2), pages 255-281, April.
  12. Michael J. Boskin & Laurence J. Kotlikoff & Douglas J. Puffert & John B. Shoven, 1987. "Social Security: A Financial Appraisal Across and Within Generations," NBER Working Papers 1891, National Bureau of Economic Research, Inc.
  13. Galasso, Vincenzo, 2000. "The US Social Security: A Financial Appraisal For The Median Voter," CEPR Discussion Papers 2456, C.E.P.R. Discussion Papers.
  14. Sveinbjörn Blöndal & Stefano Scarpetta, 1999. "The Retirement Decision in OECD Countries," OECD Economics Department Working Papers 202, OECD Publishing.
  15. Michele Boldrin & Aldo Rustichini, 2000. "Political Equilibria with Social Security," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 3(1), pages 41-78, January.
  16. Boskin, Michael J. & Hurd, Michael D., 1978. "The effect of social security on early retirement," Journal of Public Economics, Elsevier, vol. 10(3), pages 361-377, December.
  17. Feldstein, Martin S, 1974. "Social Security, Induced Retirement, and Aggregate Capital Accumulation," Journal of Political Economy, University of Chicago Press, vol. 82(5), pages 905-26, Sept./Oct.
  18. Thomas F. Cooley & Jorge Soares, 1999. "A Positive Theory of Social Security Based on Reputation," Journal of Political Economy, University of Chicago Press, vol. 107(1), pages 135-160, February.
  19. Crawford, Vincent P & Lilien, David M, 1981. "Social Security and the Retirement Decision," The Quarterly Journal of Economics, MIT Press, vol. 96(3), pages 505-29, August.
  20. Vincenzo Galasso, 1999. "The US Social Security System: What Does Political Sustainability Imply?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(3), pages 698-730, July.
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