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Early Retirement and Social Security: A Long Term Perspective

  • J. Ignacio Conde-Ruiz
  • Vincenzo Galasso
  • Paola Profeta

We provide a long-term perspective on the individual retirement behaviour and on the future of retirement. In a Markovian political economic theoretical framework, in which incentives to retire early are embedded, we derive a political equilibrium with positive social security contribution rates and early retirement. Aging has two opposite effects: it leads to lower taxes and fewer (early) retirees, while a poorer median voter will push for higher contributions. The model highlights the existence of crucial income effects: a decrease of the income of young people will induce them to postpone retirement and to vote for less social security.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2005/wp-cesifo-2005-10/cesifo1_wp1571.pdf
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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1571.

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Date of creation: 2005
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Handle: RePEc:ces:ceswps:_1571
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