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The Evolution of Retirement

  • J. Ignacio Conde-Ruiz
  • Vincenzo Galasso
  • Paola Profeta
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    We provide a long term perspective on the individual retirement behavior and on the future of early retirement. In a cross-country sample, we find that total pension spending depends positively on the degree of early retirement and on the share of elderly in the population, which increase the proportion of retirees, but has hardly any effect on the per-capita pension benefits. We show that in a Markovian political economic theoretical framework, in which incentives to retire early are embedded, a political equilibrium is characterized by an increasing sequence of social security contribution rates converging to a steady state and early retirement. Comparative statics suggest that aging and productivity slow-downs lead to higher taxes and more early retirement. However, when income effects are factored in, the model suggests that periods of stagnation - characterized by decreasing labor income - may lead middle aged individuals to postpone retirement

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    File URL: http://documentos.fedea.net/pubs/dt/2005/dt-2005-03.pdf
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    Paper provided by FEDEA in its series Working Papers with number 2005-03.

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    Handle: RePEc:fda:fdaddt:2005-03
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    1. Robert Fenge & Pierre Pestieau, 2005. "Social Security and Early Retirement," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262062496, June.
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    3. Martín Gonzalez-Eiras & Dirk Niepelt, 2005. "Sustaining Social Security," CESifo Working Paper Series 1494, CESifo Group Munich.
    4. Conde-Ruiz, José Ignacio & Galasso, Vincenzo, 2000. "Early Retirement," CEPR Discussion Papers 2589, C.E.P.R. Discussion Papers.
    5. Casamatta, Georges & Cremer, Helmuth & Pestieau, Pierre, 2003. "Voting on Pensions with Endogenous Retirement Age," CEPR Discussion Papers 3778, C.E.P.R. Discussion Papers.
    6. Hassler, John & Mora, José V Rodríguez & Storesletten, Kjetil & Zilibotti, Fabrizio, 2001. "The Survival of the Welfare State," CEPR Discussion Papers 2905, C.E.P.R. Discussion Papers.
    7. Feldstein, Martin S, 1974. "Social Security, Induced Retirement, and Aggregate Capital Accumulation," Journal of Political Economy, University of Chicago Press, vol. 82(5), pages 905-26, Sept./Oct.
    8. CREMER, Helmuth & PESTIEAU, Pierre, . "The double dividend of postponing retirement," CORE Discussion Papers RP 1696, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    9. Grossman, G.M. & Helpman, E., 1996. "Intergenerational Redistribution with Short-Lived Governments," Papers 178, Princeton, Woodrow Wilson School - Public and International Affairs.
    10. CREMER, Helmuth & PESTIEAU, Pierre, . "Reforming our pension system: is it a demographic, financial or political problem?," CORE Discussion Papers RP 1468, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    11. Paola Profeta, 2002. "Aging and Retirement: Evidence Across Countries," International Tax and Public Finance, Springer, vol. 9(6), pages 651-672, November.
    12. Krusell, Per & Quadrini, Vincenzo & Rios-Rull, Jose-Victor, 1997. "Politico-economic equilibrium and economic growth," Journal of Economic Dynamics and Control, Elsevier, vol. 21(1), pages 243-272, January.
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    17. Marco Bassetto, 1999. "Political economy of taxation in an overlapping-generations economy," Discussion Paper / Institute for Empirical Macroeconomics 133, Federal Reserve Bank of Minneapolis.
    18. Azariadis, Costas & Galasso, Vincenzo, 2002. "Fiscal Constitutions," Journal of Economic Theory, Elsevier, vol. 103(2), pages 255-281, April.
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    20. MICHEL, Philippe & PESTIEAU, Pierre, 1999. "Social security and early retirement in an overlapping-generations growth model," CORE Discussion Papers 1999051, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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    22. Lorenzo Forni, 2005. "Social Security as Markov Equilibrium in OLG Models," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 8(1), pages 178-194, January.
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    24. J. Ignacio Conde-Ruiz & Vincenzo Galasso, . "Early retirement," Working Papers 2003-03, FEDEA.
    25. Svend E. Hougaard Jensen & Morten I. Lau & Panu Poutvaara, 2004. "Efficiency and Equity Aspects of Alternative Social Security Rules," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 60(3), pages 325-, September.
    26. Boskin, Michael J, 1977. "Social Security and Retirement Decisions," Economic Inquiry, Western Economic Association International, vol. 15(1), pages 1-25, January.
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    28. Francisco M. Lagos & Juan Antonio Lacomba, 2001. "Election On Retirement Age," Working Papers. Serie AD 2001-09, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
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