Retirement Date Effects on Saving Bahavior: The Case of Non-Separable Preferences
AbstractIn this paper we demonstrate that the magnitude of the reaction of saving behavior to a change in the anticipated retirement date is largely determined by the degree to which utility is additively separable in consumption and leisure. We show that the relative decrease in saving in response to a later anticipated retirement date is larger when preferences are non-separable in consumption and leisure, and the cross-derivative of the utility function is negative, than when preferences are separable. In particular, based on our simulations, the short term decrease in aggregate pre-retirement saving in response to a later anticipated retirement date may be up to 61.5% in the non-separable case as against 31% in the separable case. In the long-term , the decrease in pre-retirement saving would be as much as 28.5% in the non-separable case, as against 16.5% in the separable case.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Economic Research Southern Africa in its series Working Papers with number 323.
Length: 23 pages
Date of creation: 2013
Date of revision:
Contact details of provider:
Postal: Newlands on Main, F0301 3rd Floor Mariendahl House, cnr Campground and Main Rds, Claremont, 7700 Cape Town
Phone: 021 671-3980
Fax: +27 21 671 3912
Web page: http://www.econrsa.org/
More information through EDIRC
Non-separable preferences; retirement date; saving;
Find related papers by JEL classification:
- D91 - Microeconomics - - Intertemporal Choice - - - Intertemporal Household Choice; Life Cycle Models and Saving
- 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-2013-01-26 (Economics of Ageing)
- NEP-ALL-2013-01-26 (All new papers)
- NEP-LAB-2013-01-26 (Labour Economics)
- NEP-UPT-2013-01-26 (Utility Models & Prospect Theory)
You can help add them by filling out this form.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Yoemna Mosaval).
If references are entirely missing, you can add them using this form.