Economic Development with Endogenous Retirement
AbstractThis paper endogenizes the elderly's labor force participation in an overlapping generations economy under the assumption that retirement is a luxury. In a developed economy, the agents earn a high wage income when young and retire when old. This reduces the labor supply (through a low participation rate of the elderly), and stimulates capital accumulation (through saving for retirement). The resulting high capital-labor ration leads to a higher wage income for the next generation. In a poor economy, the agents continue to work when old and saves little, which implies a low capital-labor ration and a low wage income for the next generation. Due to such a positive feedback mechanism, the endogeneity of retirement magnifies the persistence of growth dynamics, thereby slowing down a convergence to the steady state, and evene generating multiple steady states for empirically plausible parameter values.
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Bibliographic InfoPaper provided by Northwestern University, Center for Mathematical Studies in Economics and Management Science in its series Discussion Papers with number 1237.
Date of creation: Aug 1998
Date of revision:
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Postal: Center for Mathematical Studies in Economics and Management Science, Northwestern University, 580 Jacobs Center, 2001 Sheridan Road, Evanston, IL 60208-2014
Web page: http://www.kellogg.northwestern.edu/research/math/
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- O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
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