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Mortality transition and differential incentives for early retirement

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Author Info

  • 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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File URL: http://basepub.dauphine.fr/xmlui/bitstream/123456789/6825/1/albis_mortality.PDF
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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
Date of revision:
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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Related research

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

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References

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  1. 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.
  2. David M. Cutler & Angus S. Deaton & Adriana Lleras-Muney, 2006. "The Determinants of Mortality," Working Papers id:359, eSocialSciences.
  3. David E. Bloom & David Canning & Michael Moore, 2007. "A Theory of Retirement," NBER Working Papers 13630, National Bureau of Economic Research, Inc.
  4. Sebnem Kalemli-Ozcan & David N. Weil, 2004. "Mortality Change, the Uncertainty Effect, and Retirement," Working Papers 2004-04, Department of Economics, University of Houston.
  5. John Wilmoth & Shiro Horiuchi, 1999. "Rectangularization revisited: Variability of age at death within human populations," Demography, Springer, vol. 36(4), pages 475-495, November.
  6. Zhang, Jie & Zhang, Junsen & Lee, Ronald, 2003. "Rising longevity, education, savings, and growth," Journal of Development Economics, Elsevier, vol. 70(1), pages 83-101, February.
  7. Ben J. Heijdra & Ward E. Romp, 2007. "Retirement, Pensions, and Ageing," CESifo Working Paper Series 1974, CESifo Group Munich.
  8. Blanchard, Olivier J, 1985. "Debt, Deficits, and Finite Horizons," Journal of Political Economy, University of Chicago Press, vol. 93(2), pages 223-47, April.
  9. Chang, Fwu-Ranq, 1991. "Uncertain Lifetimes, Retirement and Economic Welfare," Economica, London School of Economics and Political Science, vol. 58(230), pages 215-32, May.
  10. Ben J. Heijdra & Jochen O. Mierau, 2009. "Annuity Market Imperfection, Retirement and Economic Growth," CESifo Working Paper Series 2717, CESifo Group Munich.
  11. Boucekkine, Raouf & de la Croix, David & Licandro, Omar, 2000. "Vintage Human Capital, Demographic Trends and Endogenous Growth," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2000007, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  12. Hippolyte D'Albis & Emmanuelle Augeraud-Véron, 2008. "Endogenous Retirement and Monetary Cycles," Post-Print hal-00424801, HAL.
  13. David Bloom & David Canning & Rick Mansfield & Michael Moore, 2006. "Demographic Change, Social Security Systems, and Savings," PGDA Working Papers 1906, Program on the Global Demography of Aging.
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  15. Hu, Sheng-Cheng, 1999. "Economic Growth in the Perpetual-Youth Model: Implications of the Annuity Market and Demographics," Journal of Macroeconomics, Elsevier, vol. 21(1), pages 107-124, January.
  16. Moshe Hazan, 2009. "Longevity and Lifetime Labor Supply: Evidence and Implications," Econometrica, Econometric Society, vol. 77(6), pages 1829-1863, November.
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Citations

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Cited by:
  1. Matteo Cervellati & Uwe Sunde, 2013. "Life Expectancy, Schooling, and Lifetime Labor Supply: Theory and Evidence Revisited," Econometrica, Econometric Society, vol. 81(5), pages 2055-2086, 09.
  2. Miguel Sánchez Romero & Joze Sambt & Alexia Prskawetz, 2012. "Quantifying the role of alternative pension reforms on the Austrian economy," MPIDR Working Papers WP-2012-026, Max Planck Institute for Demographic Research, Rostock, Germany.
  3. Lau, Sau-Him Paul, 2014. "Fertility and mortality changes in an overlapping-generations model with realistic demography," Economic Modelling, Elsevier, vol. 38(C), pages 512-521.
  4. 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.
  5. 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).
  6. repec:got:cegedp:141 is not listed on IDEAS
  7. Pierre Pestieau & Grégory Ponthière, 2012. "The public economics of increasing longevity," PSE Working Papers halshs-00676492, HAL.
  8. repec:hal:wpaper:halshs-00676492 is not listed on IDEAS
  9. Sau-Him Lau, 2013. "Does longevity improvement always raise the length of schooling through the longer-horizon mechanism?," 2013 Meeting Papers 292, Society for Economic Dynamics.
  10. 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.

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