IDEAS home Printed from https://ideas.repec.org/a/bla/metroe/v65y2014i4p619-645.html
   My bibliography  Save this article

Raising the Mandatory Retirement Age and its Effect on Long-run Income and Pay-as-you-go (PAYG) Pensions

Author

Listed:
  • Luciano Fanti

Abstract

In this paper we study the effects of raising the mandatory retirement age in the neoclassical growth model context. It is shown that postponement of the retirement age may be harmful for long-run income and even for pensions. Our findings show that the retirement age might be reduced, thereby obtaining a higher income and even higher pension benefits. This suggests that the idea that a higher mandatory age of retirement is always beneficial in the long run for income and pension payments is theoretically controversial.

Suggested Citation

  • Luciano Fanti, 2014. "Raising the Mandatory Retirement Age and its Effect on Long-run Income and Pay-as-you-go (PAYG) Pensions," Metroeconomica, Wiley Blackwell, vol. 65(4), pages 619-645, November.
    • Handle: RePEc:bla:metroe:v:65:y:2014:i:4:p:619-645
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1111/meca.12055
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Philippe Michel & Pierre Pestieau, 2013. "Social Security And Early Retirement In An Overlapping-Generations Growth Model," Annals of Economics and Finance, Society for AEF, vol. 14(2), pages 723-737, November.
    2. Hu, Sheng Cheng, 1979. "Social Security, the Supply of Labor, and Capital Accumulation," American Economic Review, American Economic Association, vol. 69(3), pages 274-283, June.
    3. repec:ebl:ecbull:v:10:y:2008:i:2:p:1-8 is not listed on IDEAS
    4. Conde-Ruiz, J. Ignacio & Galasso, Vincenzo, 2004. "The macroeconomics of early retirement," Journal of Public Economics, Elsevier, vol. 88(9-10), pages 1849-1869, August.
    5. Berndt, Ernst R, 1976. "Reconciling Alternative Estimates of the Elasticity of Substitution," The Review of Economics and Statistics, MIT Press, vol. 58(1), pages 59-68, February.
    6. Charles I. Jones, 2003. "Growth, capital shares, and a new perspective on production functions," Proceedings, Federal Reserve Bank of San Francisco, issue Nov.
    7. Georges Casamatta & Helmuth Cremer & Pierre Pestieau, 2005. "Voting on Pensions with Endogenous Retirement Age," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 12(1), pages 7-28, January.
    8. Chakraborty, Shankha, 2004. "Endogenous lifetime and economic growth," Journal of Economic Theory, Elsevier, vol. 116(1), pages 119-137, May.
    9. Bertrand Crettez & Patricia Le Maitre, 2002. "Optimal age of retirement and population growth," Journal of Population Economics, Springer;European Society for Population Economics, vol. 15(4), pages 737-755.
    10. Peter Diamond, 2007. "Top-heavy load: Trouble ahead for social security systems, Introduction by Peter A. Diamond," CESifo Forum, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 8(03), pages 28-36, October.
    11. Luciano Fanti & Luca Gori, 2013. "Fertility-related pensions and cyclical instability," Journal of Population Economics, Springer;European Society for Population Economics, vol. 26(3), pages 1209-1232, July.
    12. Giam Cipriani, 2014. "Population aging and PAYG pensions in the OLG model," Journal of Population Economics, Springer;European Society for Population Economics, vol. 27(1), pages 251-256, January.
    13. Juan Lacomba & Francisco Lagos, 2006. "Population aging and legal retirement age," Journal of Population Economics, Springer;European Society for Population Economics, vol. 19(3), pages 507-519, July.
    14. Abu-Qarn, Aamer S. & Abu-Bader, Suleiman, 2007. "Sources of Growth Revisited: Evidence from Selected MENA Countries," World Development, Elsevier, vol. 35(5), pages 752-771, May.
    15. Miles, David, 1999. "Modelling the Impact of Demographic Change upon the Economy," Economic Journal, Royal Economic Society, vol. 109(452), pages 1-36, January.
    16. Abdelhak Senhadji, 2000. "Sources of Economic Growth: An Extensive Growth Accounting Exercise," IMF Staff Papers, Palgrave Macmillan, vol. 47(1), pages 1-6.
    17. Lazear, Edward P, 1979. "Why Is There Mandatory Retirement?," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1261-1284, December.
    18. Luciano Fanti & Luca Gori, 2012. "Fertility and PAYG pensions in the overlapping generations model," Journal of Population Economics, Springer;European Society for Population Economics, vol. 25(3), pages 955-961, July.
    19. Denis Kessler, 1990. "Solutions to the Coming Crisis in Social Security: Save Today or Work Tomorrow?," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 15(2), pages 122-138, April.
    20. N. Gregory Mankiw & David Romer & David N. Weil, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(2), pages 407-437.
    21. Momota, Akira, 2003. "A retirement decision in the presence of a social security system," Journal of Macroeconomics, Elsevier, vol. 25(1), pages 73-86, March.
    22. Jeremy Greenwood & Richard Rogerson & Randall Wright, 1993. "Putting home economics into macroeconomics," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 17(Sum), pages 2-11.
    23. Luca Gori & Luciano Fanti, 2008. "Longevity and PAYG pension systems sustainability," Economics Bulletin, AccessEcon, vol. 10(2), pages 1-8.
    24. Codrina Rada, 2012. "Social Security Tax And Endogenous Technical Change In An Economy With An Aging Population," Metroeconomica, Wiley Blackwell, vol. 63(4), pages 727-756, November.
    25. Tito Boeri & Axel Boersch-Supan & Guido Tabellini, 2002. "Pension Reforms and the Opinions of European Citizens," American Economic Review, American Economic Association, vol. 92(2), pages 396-401, May.
    26. Dhrymes, Phoebus J & Zarembka, Paul, 1970. "Elasticities of Substitution for Two-Digit Manufacturing Industries: A Correction," The Review of Economics and Statistics, MIT Press, vol. 52(1), pages 115-117, February.
    27. Francisco Rodríguez & Daniel Ortega, 2006. "Are capital shares higher in poor countries? Evidence from Industrial Surveys," Wesleyan Economics Working Papers 2006-023, Wesleyan University, Department of Economics.
    28. Koichi Miyazaki, 2013. "Pay-as-you-go social security and endogenous fertility in a neoclassical growth model," Journal of Population Economics, Springer;European Society for Population Economics, vol. 26(3), pages 1233-1250, July.
    29. Aamer Abu-Qarn & Suleiman Abu-Bader, 2007. "Getting Income Shares Right: A Panel Data Investigation for OECD Countries," Working Papers 0701, Ben-Gurion University of the Negev, Department of Economics.
    30. Sandro Gronchi & Sergio Nisticò, 2008. "Theoretical Foundations Of Pay‐As‐You‐Go Defined‐Contribution Pension Schemes," Metroeconomica, Wiley Blackwell, vol. 59(2), pages 131-159, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Riccardo Magnani, 2016. "Is an Increase in the Minimum Retirement Age Always Desirable? The Case of Notional Defined Contribution Systems," Metroeconomica, Wiley Blackwell, vol. 67(3), pages 578-602, July.
    2. Cavalli, F. & Chen, H.-J. & Li, M.-C. & Naimzada, A. & Pecora, N., 2023. "Heterogeneous expectations and equilibria selection in an evolutionary overlapping generations model," Journal of Mathematical Economics, Elsevier, vol. 104(C).
    3. Cipriani, Giam Pietro & Pascucci, Francesco, 2020. "Pension policies in a model with endogenous fertility," Journal of Pension Economics and Finance, Cambridge University Press, vol. 19(1), pages 109-125, January.
    4. Zhen Hu & James Yang, 2021. "Does Delayed Retirement Crowd Out Workforce Welfare? Evidence in China," SAGE Open, , vol. 11(4), pages 21582440211, November.
    5. Edouard A. Ribes, 2022. "Financial planning and optimal retirement timing for physically intensive occupations," SN Business & Economics, Springer, vol. 2(8), pages 1-28, August.
    6. Peter J. Stauvermann & Jin Hu, 2018. "What can China Expect from an Increase of the Mandatory Retirement Age?," Annals of Economics and Finance, Society for AEF, vol. 19(1), pages 229-246, May.
    7. Jin Hu & Peter-Josef Stauvermann & Surya Nepal & Yuanhua Zhou, 2023. "Can the Policy of Increasing Retirement Age Raise Pension Revenue in China—A Case Study of Anhui Province," IJERPH, MDPI, vol. 20(2), pages 1-15, January.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Luciano Fanti, 2012. "Consequences of a boost of mandatory retirement age on long run income and PAYG pensions," Discussion Papers 2012/149, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    2. Luciano Fanti, 2015. "Growth, PAYG pension systems crisis and mandatory age of retirement," Economics Bulletin, AccessEcon, vol. 35(2), pages 1160-1167.
    3. Peter J. Stauvermann & Jin Hu, 2018. "What can China Expect from an Increase of the Mandatory Retirement Age?," Annals of Economics and Finance, Society for AEF, vol. 19(1), pages 229-246, May.
    4. Jin Hu & Peter-Josef Stauvermann & Surya Nepal & Yuanhua Zhou, 2023. "Can the Policy of Increasing Retirement Age Raise Pension Revenue in China—A Case Study of Anhui Province," IJERPH, MDPI, vol. 20(2), pages 1-15, January.
    5. J. Ignacio Conde-Ruiz & Vincenzo Galasso & Paola Profeta, "undated". "The Evolution of Retirement," Working Papers 2005-03, FEDEA.
    6. Luciano Fanti, 2012. "PAYG pensions and fertility drop: some (pleasant) arithmetic," Discussion Papers 2012/147, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    7. Galasso, Vincenzo, 2008. "Postponing retirement: the political effect of aging," Journal of Public Economics, Elsevier, vol. 92(10-11), pages 2157-2169, October.
    8. David De La Croix & Géraldine Mahieu & Alexandra Rillaers, 2004. "How Should the Allocation of Resources Adjust to the Baby Bust?," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 6(4), pages 607-636, October.
    9. Enrique Fatás & Juan A. Lacomba & Francisco M. Lagos & Ana I. Moro, 2008. "Experimental tests on consumption, savings and pensions," ThE Papers 08/14, Department of Economic Theory and Economic History of the University of Granada..
    10. Antràs Pol, 2004. "Is the U.S. Aggregate Production Function Cobb-Douglas? New Estimates of the Elasticity of Substitution," The B.E. Journal of Macroeconomics, De Gruyter, vol. 4(1), pages 1-36, April.
    11. Benjamin Bittschi & Berthold U. Wigger, 2019. "On the Political Feasibility of Increasing the Legal Retirement Age," CESifo Working Paper Series 7492, CESifo.
    12. Luciano Fanti & Luca Gori, 2010. "Economic Growth and Welfare in a Neoclassical Overlapping Generations Growth Model with Minimum Wages and Consumption Taxes," LABOUR, CEIS, vol. 24(3), pages 238-262, September.
    13. J. Ignacio Conde-Ruiz & Vincenzo Galasso & Paola Profeta, 2005. "Early Retirement and Social Security: A Long Term Perspective," CESifo Working Paper Series 1571, CESifo.
    14. Enrique Fatas & Juan A. Lacomba & Francisco Lagos, 2007. "An Experimental Test On Retirement Decisions," Economic Inquiry, Western Economic Association International, vol. 45(3), pages 602-614, July.
    15. Chen Hung-Ju & Miyazaki Koichi, 2022. "Pay-as-You-Go Social Security and Educational Subsidy in an Overlapping Generations Model with Endogenous Fertility and Endogenous Retirement," The B.E. Journal of Macroeconomics, De Gruyter, vol. 22(2), pages 787-820, June.
    16. Betti, Thierry & Lefebvre, Mathieu & Pestieau, Pierre, 2023. "Macroeconomics of aging," LIDAM Discussion Papers CORE 2023002, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    17. Monica Pop Silaghi & Diana Alexa, 2015. "Sources of Growth: Evidence from Ten Central and Eastern European Countries during 1993-2008," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 62(5), pages 643-661, December.
    18. Axel Dreher & Pierre-Guillaume Méon & Friedrich Schneider, 2014. "The devil is in the shadow: Do institutions affect income and productivity or only official income and official productivity?," Post-Print CEB, ULB -- Universite Libre de Bruxelles, vol. 158(1-2), pages 121-141, January.
    19. Cipriani, Giam Pietro & Fioroni, Tamara, 2022. "Social security and endogenous demographic change: child support and retirement policies," Journal of Pension Economics and Finance, Cambridge University Press, vol. 21(3), pages 307-325, July.
    20. Luca Gori & Mauro Sodini, 2011. "Nonlinear Dynamics in an OLG Growth Model with Young and Old Age Labour Supply: The Role of Public Health Expenditure," Computational Economics, Springer;Society for Computational Economics, vol. 38(3), pages 261-275, October.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:metroe:v:65:y:2014:i:4:p:619-645. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0026-1386 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.