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Early Retirement and Social Security: A Long Term Perspective

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  • J. Ignacio Conde-Ruiz
  • Vincenzo Galasso
  • Paola Profeta

Abstract

We provide a long-term perspective on the individual retirement behaviour and on the future of retirement. In a Markovian political economic theoretical framework, in which incentives to retire early are embedded, we derive a political equilibrium with positive social security contribution rates and early retirement. Aging has two opposite effects: it leads to lower taxes and fewer (early) retirees, while a poorer median voter will push for higher contributions. The model highlights the existence of crucial income effects: a decrease of the income of young people will induce them to postpone retirement and to vote for less social security.

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1571.

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Date of creation: 2005
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Handle: RePEc:ces:ceswps:_1571

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Keywords: pensions; income effect; tax burden; politico-economic Markovian equilibrium;

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References

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  6. GALASSO, Vincenzo & PROFETA, Paola, 2003. "Lessons for an aging society: the political sustainability of social security systems," CORE Discussion Papers, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) 2003077, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  7. Conde-Ruiz, J. Ignacio & Galasso, Vincenzo, 2004. "The macroeconomics of early retirement," Journal of Public Economics, Elsevier, Elsevier, vol. 88(9-10), pages 1849-1869, August.
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Citations

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Cited by:
  1. Vincenzo Galasso, 2006. "Postponing Retirement: the Political Push of Aging," CSEF Working Papers, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy 164, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  2. Ryo Arawatari & Tetsuo Ono, 2008. "A Political Economy Model of Earnings Mobility and Redistribution Policy," Discussion Papers in Economics and Business, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP) 08-18-Rev.2, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP), revised Sep 2010.

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