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Age-dependent Taxation, Retirement Behavior, and Work Hours Over the Life Cycle

  • Julian Diaz Saavedra

    ()

    (Department of Economic Theory and Economic History, University of Granada.)

We use a computable overlapping generations model economy, which matches the stylized facts con- cerning retirement behavior, to analyze the consequences of three reforms designed to reduce tax rates on the labor supply of older workers. We nd that these reforms increase the participation rates of the elderly and show that the gains, in terms of old age work hours, are non-trivial. However, we also nd that the total labor supply response to the reforms is not so much an increase in total lifetime hours as it is a reallocation of hours over the life cycle. Finally, we show that these reforms, designed to increase the length of the working life of individuals, may not increase output.

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File URL: http://www.ugr.es/~teoriahe/RePEc/gra/wpaper/thepapers13_09.pdf
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Paper provided by Department of Economic Theory and Economic History of the University of Granada. in its series ThE Papers with number 13/09.

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Length: 37 pages
Date of creation: 25 Sep 2013
Date of revision:
Handle: RePEc:gra:wpaper:13/09
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  1. Imrohoroglu, Ayse & Imrohoroglu, Selahattin & Joines, Douglas H, 1995. "A Life Cycle Analysis of Social Security," Economic Theory, Springer, vol. 6(1), pages 83-114, June.
  2. Gourinchas, Pierre-Olivier & Parker, Jonathan A, 2000. "Consumption Over the Life-Cycle," CEPR Discussion Papers 2345, C.E.P.R. Discussion Papers.
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  4. Sergi Jiménez-Martín & Alfonso R. Sánchez, 2003. "An evaluation of the life-cycle effects of minimum pensions on retirement behavior," Economics Working Papers 715, Department of Economics and Business, Universitat Pompeu Fabra, revised Jun 2006.
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  6. 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.
  7. Angel Melguizo & Manuel Balmaseda & David Taguas, 2005. "Las reformas necesarias en el sistema de pensiones contributivas en Espana," Working Papers 0505, BBVA Bank, Economic Research Department.
  8. Edward C. Prescott & Richard Rogerson & Johanna Wallenius, 2009. "Lifetime Aggregate Labor Supply with Endogenous Workweek Length," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 12(1), pages 23-36, January.
  9. Matthew Weinzierl, 2011. "The Surprising Power of Age-Dependent Taxes," Review of Economic Studies, Oxford University Press, vol. 78(4), pages 1490-1518.
  10. Joseph Altonji, 1984. "Intertemporal Substitution in Labor Supply: Evidence from Micro Data," Working Papers 562, Princeton University, Department of Economics, Industrial Relations Section..
  11. MaCurdy, Thomas E, 1981. "An Empirical Model of Labor Supply in a Life-Cycle Setting," Journal of Political Economy, University of Chicago Press, vol. 89(6), pages 1059-85, December.
  12. Gervais, Martin, 2009. "On the optimality of age-dependent taxes and the progressive U.S. tax system," Discussion Paper Series In Economics And Econometrics 0905, Economics Division, School of Social Sciences, University of Southampton.
  13. Raquel Vegas & Isabel Argimón & Marta Botella & Clara I. González, 2009. "Retirement behaviour and retirement incentives in Spain," Banco de Espa�a Working Papers 0913, Banco de Espa�a.
  14. Gopi Shah Goda & John B. Shoven & Sita Nataraj Slavov, 2007. "A Tax on Work for the Elderly: Medicare as a Secondary Payer," NBER Working Papers 13383, National Bureau of Economic Research, Inc.
  15. Herbertsson, Tryggvi Thor & Orszag, Mike, 2003. "The Early Retirement Burden: Assessing the Costs of the Continued Prevalence of Early Retirement in OECD Countries," IZA Discussion Papers 816, Institute for the Study of Labor (IZA).
  16. Richard Rogerson & Johanna Wallenius, 2009. "Retirement in a Life Cycle Model of Labor Supply with Home Production," Working Papers wp205, University of Michigan, Michigan Retirement Research Center.
  17. Sánchez Martín, Alfonso R., 2010. "Endogenous retirement and public pension system reform in Spain," Economic Modelling, Elsevier, vol. 27(1), pages 336-349, January.
  18. Michele Boldrin & José Ignacio Conde-Ruiz & Javier Díaz Giménez, 2010. "Eppur si Muove! Spain: Growing without a Model," Working Papers 2010-12, FEDEA.
  19. Beatrice Scheubel & Daniel Schunk & Joachim Winter, 2009. "Don't Raise the Retirement Age! An Experiment on Opposition to Pension Reforms and East-West Differences in Germany," CESifo Working Paper Series 2752, CESifo Group Munich.
  20. Laitner, John & Silverman, Dan, 2012. "Consumption, retirement and social security: Evaluating the efficiency of reform that encourages longer careers," Journal of Public Economics, Elsevier, vol. 96(7-8), pages 615-634.
  21. Javier Diaz-Gimenez & Julian Diaz-Saavedra, 2009. "Delaying Retirement in Spain," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 12(1), pages 147-167, January.
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