50 is the new 30: Long-run trends of schooling and retirement explained by human aging
AbstractWorkers in the US and other developed countries retire no later than a century ago and spend a significantly longer part of their life in school, implying that they stay less years in the work force. The facts of longer schooling and simultaneously shorter working life are seemingly hard to square with the rationality of the standard economic life cycle model. In this paper we propose a novel theory, based on health and aging, that explains these long-run trends. Workers optimally respond to a longer stay in a healthy state of high productivity by obtaining more education and supplying less labor. Better health increases productivity and amplifies the return on education. The health accelerator allows workers to finance educational efforts with less forgone labor supply than in the previous state of shorter healthy life expectancy. When both life-span and healthy life expectancy increase, the health effect is dominating and the working life gets shorter if the preference for leisure is sufficiently strong or the return on education is sufficiently large. We calibrate an extended version of the model and show that it is capable to predict the historical trends of schooling and retirement. --
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Bibliographic InfoPaper provided by University of Goettingen, Department of Economics in its series Center for European, Governance and Economic Development Research Discussion Papers with number 152.
Date of creation: 2013
Date of revision:
healthy life expectancy; longevity; education; retirement; labor supply; compression of morbidity;
Find related papers by JEL classification:
- E20 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
- I25 - Health, Education, and Welfare - - Education - - - Education and Economic Development
- J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
- O10 - Economic Development, Technological Change, and Growth - - Economic Development - - - General
- O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
This paper has been announced in the following NEP Reports:
- NEP-AGE-2013-04-13 (Economics of Ageing)
- NEP-ALL-2013-04-13 (All new papers)
- NEP-DGE-2013-04-13 (Dynamic General Equilibrium)
- NEP-HIS-2013-04-13 (Business, Economic & Financial History)
- NEP-MAC-2013-04-13 (Macroeconomics)
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- repec:ner:dauphi:urn:hdl:123456789/6825 is not listed on IDEAS
- d'Albis, Hippolyte & Lau, Paul & Sanchez-Romero, Miguel, 2010.
"Mortality transition and differential incentives for early retirement,"
LERNA Working Papers
10.21.327, LERNA, University of Toulouse.
- dʼAlbis, Hippolyte & Lau, Sau-Him Paul & Sánchez-Romero, Miguel, 2012. "Mortality transition and differential incentives for early retirement," Journal of Economic Theory, Elsevier, vol. 147(1), pages 261-283.
- Hippolyte D'Albis & Paul Lau Sau-Him & Miguel Sanchez-Romero, 2012. "Mortality transition and differential incentives for early retirement," UniversitÃ© Paris1 PanthÃ©on-Sorbonne (Post-Print and Working Papers) hal-00659868, HAL.
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