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The Trend in Retirement

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Abstract

A model with leisure production and endogenous retirement is used to explain the declining labor-force participation rates of elderly males. Using the Health and Retirement Study, the model is calibrated to cross-sectional data on the labor-force participation rates of elderly US males by age and their average drop in market consumption in the year 2000. Running the calibrated model for the period 1850 to 2000, a prediction of the evolution of the cross-section is obtained and compared with data. The model is able to predict both the increase in retirement since 1850 and the observed drop in market consumption at the moment of retirement. The increase in retirement is driven by rising real wages and a falling price of leisure goods over time.

Suggested Citation

  • Karen Kopecky, 2005. "The Trend in Retirement," Economie d'Avant Garde Research Reports 12, Economie d'Avant Garde.
    • Handle: RePEc:eag:rereps:12
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    More about this item

    Keywords

    retirement; leisure; home production; consumption-drop; technological progress;
    All these keywords.

    JEL classification:

    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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