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Mortality transition and differential incentives for early retirement

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  • D'Albis, Hippolyte
  • Lau, Paul S.
  • Sanchez-Romero, Miguel

Abstract

Many studies specify human mortality patterns parametrically, with a parameter change affecting mortality rates at different ages simultaneously. Motivated by the stylized fact that a mortality decline affects primarily younger people in the early phase of mortalitytransition but mainly older people in the later phase, we study how a mortality change at an arbitrary age affects optimal retirement age. Using the Volterra derivative for a functional, we show that mortality reductions at older ages delay retirement unambiguously, but that mortality reductions at younger ages may lead to earlierretirement due to a substantial increase in the individualʼs expected lifetime human wealth.

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Bibliographic Info

Paper provided by Paris Dauphine University in its series Economics Papers from University Paris Dauphine with number 123456789/6825.

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Date of creation: 2012
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Publication status: Published in Journal of Economic Theory, 2012, Vol. 147, no. 1. pp. 261-283.Length: 22 pages
Handle: RePEc:dau:papers:123456789/6825

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Keywords: incentive for early retirement; lifetime human wealth effect; years-to-consume effect; mortality decline;

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  1. Hu, Sheng-Cheng, 1999. "Economic Growth in the Perpetual-Youth Model: Implications of the Annuity Market and Demographics," Journal of Macroeconomics, Elsevier, Elsevier, vol. 21(1), pages 107-124, January.
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  3. Sebnem Kalemli-Ozcan & David N. Weil, 2004. "Mortality Change, the Uncertainty Effect, and Retirement," Working Papers, Department of Economics, University of Houston 2004-04, Department of Economics, University of Houston.
  4. David M. Cutler & Angus S. Deaton & Adriana Lleras-Muney, 2006. "The Determinants of Mortality," NBER Working Papers 11963, National Bureau of Economic Research, Inc.
  5. Dora L. Costa, 1998. "The Evolution of Retirement," NBER Chapters, in: The Evolution of Retirement: An American Economic History, 1880-1990, pages 6-31 National Bureau of Economic Research, Inc.
  6. D'ALBIS Hippolyte & AUGERAUD-VERON Emmanuelle, 2007. "Endogenous Retirement and Monetary Cycles," LERNA Working Papers, LERNA, University of Toulouse 07.14.235, LERNA, University of Toulouse.
  7. Costa, Dora L, 1998. "The Evolution of Retirement: Summary of a Research Project," American Economic Review, American Economic Association, American Economic Association, vol. 88(2), pages 232-36, May.
  8. Ben J. Heijdra & Jochen O. Mierau, 2009. "Annuity Market Imperfection, Retirement and Economic Growth," CESifo Working Paper Series 2717, CESifo Group Munich.
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  11. Raouf Boucekkine & David de la Croix & Omar Licandro, . "vintage human capital, demographic trends and endogenous growth," Working Papers 2000-02, FEDEA.
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  14. Gruber, Jonathan & Wise, David, 1998. "Social Security and Retirement: An International Comparison," American Economic Review, American Economic Association, American Economic Association, vol. 88(2), pages 158-63, May.
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Cited by:
  1. Pierre Pestieau & Grégory Ponthière, 2012. "The public economics of increasing longevity," PSE Working Papers halshs-00676492, HAL.
  2. Kuhn, Michael & Wrzaczek, Stefan & Prskawetz, Alexia & Feichtinger, Gustav, 2012. "Optimal choice of health and retirement in a life-cycle model," ECON WPS - Vienna University of Technology Working Papers in Economic Theory and Policy 01/2012, Vienna University of Technology, Institute for Mathematical Methods in Economics, Research Group Economics (ECON).
  3. Cervellati, Matteo & Sunde, Uwe, 2013. "Life Expectancy, Schooling, and Lifetime Labor Supply: Theory and Evidence Revisited," CEPR Discussion Papers, C.E.P.R. Discussion Papers 9399, C.E.P.R. Discussion Papers.
  4. Strulik, Holger & Werner, Katharina, 2013. "50 is the new 30: Long-run trends of schooling and retirement explained by human aging," Center for European, Governance and Economic Development Research Discussion Papers 152, University of Goettingen, Department of Economics.
  5. Strulik, Holger & Werner, Katharina, 2012. "Life expectancy, labor supply, and long-run growth: Reconciling theory and evidence," Center for European, Governance and Economic Development Research Discussion Papers 141, University of Goettingen, Department of Economics.
  6. Sánchez-Romero, Miguel & Sambt, Jože & Prskawetz, Alexia, 2013. "Quantifying the role of alternative pension reforms on the Austrian economy," Labour Economics, Elsevier, Elsevier, vol. 22(C), pages 94-114.
  7. repec:hal:wpaper:halshs-00676492 is not listed on IDEAS
  8. repec:got:cegedp:141 is not listed on IDEAS
  9. Lau, Sau-Him Paul, 2014. "Fertility and mortality changes in an overlapping-generations model with realistic demography," Economic Modelling, Elsevier, Elsevier, vol. 38(C), pages 512-521.
  10. Sau-Him Lau, 2013. "Does longevity improvement always raise the length of schooling through the longer-horizon mechanism?," 2013 Meeting Papers, Society for Economic Dynamics 292, Society for Economic Dynamics.
  11. Klaus Prettner & David Canning, 2014. "Increasing life expectancy and optimal retirement in general equilibrium," Economic Theory, Springer, Springer, vol. 56(1), pages 191-217, May.

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