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The optimal legal retirement age in an OLG model with endogenous labour supply

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Author Info

  • Hansen, Casper Worm

    ()
    (Department of Business and Economics)

  • Lønstrup, Lars

    ()
    (Department of Business and Economics)

Abstract

The long run welfare implications of the legal retirement age are studied in a perfect foresight overlapping-generations model where agents live for two periods. Agents’ lifetime is divided between working life and retirement by a legal retirement age controlled by the government whereas agents, besides savings, control the intensive margin or "yearly" labour supply. The legal retirement age is utilized to dampen distortionary effects of payroll taxes and public pension annuities and promote capital accumulation. We show that a social optimal legal retirement age exists and how it depends on whether payroll taxes or benefit annuities ensures budget balance of the PAYG pension system.

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Bibliographic Info

Paper provided by Department of Business and Economics, University of Southern Denmark in its series Discussion Papers of Business and Economics with number 5/2009.

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Length: 26 pages
Date of creation: 01 Jul 2009
Date of revision:
Handle: RePEc:hhs:sdueko:2009_005

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Postal: Department of Business and Economics, University of Southern Denmark, Campusvej 55, DK-5230 Odense M, Denmark
Phone: 65 50 32 33
Fax: 65 50 32 37
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Web page: http://www.sdu.dk/ivoe
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Keywords: Optimal legal retirement age; pay-as-you-go-pension systems; overlapping-generations model;

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References

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