The Genesis of the Golden Age - Accounting for the Rise in Health and Leisure
AbstractWe develop a life cycle model featuring an optimal retirement decision in the presence of physiological aging. In modeling the aging process we draw on recent advances within the fields of biology and medicine. In the model individuals decide on optimal consumption during life, the age of retirement, and (via health investments) the timing of their death. Accordingly, "years in retirement" is fully endogenously determined. Using the model we can account for the evolution of age of retirement and longevity across cohorts born between 1850 and 1940 in the US. Our analysis indicates that 2/3 of the observed increase in longevity can be accounted for by wage growth, whereas the driver behind the observed rising age of retirement appears to have been technological change in health care. Both technology and income contribute to the rise in years in retirement, but the contribution from income is slightly greater.
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Bibliographic InfoPaper provided by University of Copenhagen. Department of Economics in its series Discussion Papers with number 12-10.
Length: 31 pages
Date of creation: Aug 2012
Date of revision:
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More information through EDIRC
Aging; Longevity; Retirement; Health; Health Technology;
Find related papers by JEL classification:
- D91 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Consumer Choice; Life Cycle Models and Saving
- I15 - Health, Education, and Welfare - - Health - - - Health and Economic Development
- J17 - Labor and Demographic Economics - - Demographic Economics - - - Value of Life; Foregone Income
- J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
This paper has been announced in the following NEP Reports:
- NEP-AGE-2012-09-09 (Economics of Ageing)
- NEP-ALL-2012-09-09 (All new papers)
- NEP-DGE-2012-09-09 (Dynamic General Equilibrium)
- NEP-HEA-2012-09-09 (Health Economics)
- NEP-LTV-2012-09-09 (Unemployment, Inequality & Poverty)
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