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The Effect of Social Security, Demography and Technology on Retirement

  • Ferreira, Pedro Cavalcanti Gomes
  • Santos, Marcelo Rodrigues dos

This article investigates the causes in the reduction of labor force participation of the old. We argue that the changes in social security policy, in technology and in demography may account for most of the changes in retirement over the second part of the last century in the U.S. economy. We develop a dynamic general equilibrium model with endogenous retirement that embeds social security legislation. The model is able to match very closely the increase in the retirement rate of males aged 65 and older. It also quanti es the isolated impact on retirement and on the solvency of the social security system of the di¤erent factors. The model suggests that technological and demographic changes had a strong in uence on retirement, so that it would have increased signi cantly even if the social security rules had not changed. However, as the latter became much more generous in the past, changes in social security policy can account not only for a sizeable part of the expansion of retirement, but also for the most of the observed increase in the social security expenses as a share of GDP.

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Paper provided by FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil) in its series Economics Working Papers (Ensaios Economicos da EPGE) with number 683.

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Date of creation: 08 Dec 2008
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Handle: RePEc:fgv:epgewp:683
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  17. Ellen R. McGrattan & Richard Rogerson, 1998. "Changes in hours worked since 1950," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 2-19.
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