A One-Sector Neoclassical Growth Model with Endogenous Retirement
AbstractThis paper extends Diamond's OG model by allowing the agents to make the retirement decision. Earning a higher wage income when young not only enables the agents to save more. It also induces more agents to retire early and gives an additional incentive to save more for retirement. This leads to a higher capitallabor ratio in the following period, and hence the next generation of agents earns a higher wage income when young. Due to this positive feedback mechanism, endogenous retirement magnifies the persistence of growth dynamics and even generates multiple steady states for empirically plausible parameter values.
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Bibliographic InfoPaper provided by CIRJE, Faculty of Economics, University of Tokyo in its series CIRJE F-Series with number CIRJE-F-531.
Length: 26 pages
Date of creation: Dec 2007
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Other versions of this item:
- Kiminori Matsuyama, 2008. "A One-Sector Neoclassical Growth Model With Endogenous Retirement," The Japanese Economic Review, Japanese Economic Association, vol. 59(2), pages 139-155.
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