Longevity and Schooling: The Case of Retirement
AbstractIt is often conjectured that higher life expectancy leads to longer schooling. The reasoning behind this notion is that a longer lifespan increases the recovery period of human capital investment and thus, makes it more profitable to invest in education. This notion goes back to Ben-Porath (1967) and is therefore often termed the Ben-Porath mechanism. However, the original Ben-Porath mechanism concerns the length of economic life and not the length of life per se. This distinction is important in the presence of retirement and especially so as earlier retirement ages are observed in many western countries. This paper presents an overlapping generations model including both an educational and a retirement decision, thereby being able to test the Ben-Porath mechanism using the correct de nition of length of working life. It is found that an increase in life expectancy does not necessarily increase the expected length of economic life as also early retirement can occur. Schooling still increases, however not due to the increase in the recovery horizon but due to an increase in the probability of surviving the recovery period.
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Bibliographic InfoPaper provided by University of Copenhagen. Department of Economics in its series Discussion Papers with number 12-15.
Length: 29 pages
Date of creation: 01 Sep 2012
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More information through EDIRC
longevity; human capital; retirement; overlapping generations;
Find related papers by JEL classification:
- D91 - Microeconomics - - Intertemporal Choice - - - Intertemporal Household Choice; Life Cycle Models and Saving
- I20 - Health, Education, and Welfare - - Education - - - General
- J10 - Labor and Demographic Economics - - Demographic Economics - - - General
- 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-2012-11-24 (Economics of Ageing)
- NEP-ALL-2012-11-24 (All new papers)
- NEP-DEM-2012-11-24 (Demographic Economics)
- NEP-DGE-2012-11-24 (Dynamic General Equilibrium)
- NEP-EDU-2012-11-24 (Education)
- NEP-HEA-2012-11-24 (Health Economics)
- NEP-LAB-2012-11-24 (Labour Economics)
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