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Early Retirement

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  • 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. Azariadis, Costas & Galasso, Vincenzo, 2002. "Fiscal Constitutions," Journal of Economic Theory, Elsevier, Elsevier, vol. 103(2), pages 255-281, April.
  2. Conde-Ruiz, Jose Ignacio & Galasso, Vincenzo, 2005. "Positive arithmetic of the welfare state," Journal of Public Economics, Elsevier, Elsevier, vol. 89(5-6), pages 933-955, June.
  3. Thomas F. Cooley & Jorge Soares, 1999. "A Positive Theory of Social Security Based on Reputation," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 107(1), pages 135-160, February.
  4. Michele Boldrin & Juan J. Dolado & Juan F. Jimeno & Franco Peracchi, 1999. "The future of pensions in Europe," Economic Policy, CEPR;CES;MSH, CEPR;CES;MSH, vol. 14(29), pages 287-320, October.
  5. Guido Tabellini, 1990. "A Positive Theory of Social Security," NBER Working Papers 3272, National Bureau of Economic Research, Inc.
  6. Diamond, P. A. & Mirrlees, J. A., 1978. "A model of social insurance with variable retirement," Journal of Public Economics, Elsevier, Elsevier, vol. 10(3), pages 295-336, December.
  7. Crawford, Vincent P & Lilien, David M, 1981. "Social Security and the Retirement Decision," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 96(3), pages 505-29, August.
  8. 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.
  9. Ricardo J. Caballero & Mohamad L. Hammour, 1998. "The Macroeconomics of Specificity," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 106(4), pages 724-767, August.
  10. Galasso, Vincenzo, 2000. "The US Social Security: A Financial Appraisal For The Median Voter," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2456, C.E.P.R. Discussion Papers.
  11. Stephen Coate & Stephen Morris, . ""Policy Persistence ''," CARESS Working Papres, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences 95-19, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences.
  12. Hassler, John & Mora, Jose & Storesletten, Kjetil & Zilibotti, Fabrizio, 2002. "The Survival of the Welfare State," Seminar Papers, Stockholm University, Institute for International Economic Studies 704, Stockholm University, Institute for International Economic Studies.
  13. Galasso, Vincenzo & Profeta, Paola, 2002. "The political economy of social security: a survey," European Journal of Political Economy, Elsevier, Elsevier, vol. 18(1), pages 1-29, March.
  14. Vincenzo Galasso, 1999. "The US Social Security System: What Does Political Sustainability Imply?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(3), pages 698-730, July.
  15. Michele Boldrin & Aldo Rustichini, 2000. "Political Equilibria with Social Security," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 3(1), pages 41-78, January.
  16. Lazear, Edward P, 1979. "Why Is There Mandatory Retirement?," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 87(6), pages 1261-84, December.
  17. Sveinbjörn Blöndal & Stefano Scarpetta, 1999. "The Retirement Decision in OECD Countries," OECD Economics Department Working Papers 202, OECD Publishing.
  18. 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.
  19. Krusell, Per & Quadrini, Vincenzo & Rios-Rull, Jose-Victor, 1997. "Politico-economic equilibrium and economic growth," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 21(1), pages 243-272, January.
  20. Boskin, Michael J. & Hurd, Michael D., 1978. "The effect of social security on early retirement," Journal of Public Economics, Elsevier, Elsevier, vol. 10(3), pages 361-377, December.
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