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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. John Laitner & Dan Silverman, 2005. "Estimating Life-Cycle Parameters from Consumption Behavior at Retirement," NBER Working Papers 11163, National Bureau of Economic Research, Inc.
  2. 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.
  3. 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.
  4. 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.
  5. Pierre-Olivier Gourinchas & Jonathan A. Parker, 1999. "Consumption Over the Life Cycle," NBER Working Papers 7271, National Bureau of Economic Research, Inc.
  6. Michele Boldrin & Sergi Jimenez-Martni & Franco Peracchi, 1997. "Social Security and Retirement in Spain," NBER Working Papers 6136, National Bureau of Economic Research, Inc.
  7. Sánchez Martín, Alfonso R., 2010. "Endogenous retirement and public pension system reform in Spain," Economic Modelling, Elsevier, vol. 27(1), pages 336-349, January.
  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. 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.
  10. 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.
  11. Matthew Weinzierl, 2011. "The Surprising Power of Age-Dependent Taxes," Review of Economic Studies, Oxford University Press, vol. 78(4), pages 1490-1518.
  12. Michele Boldrin & José Ignacio Conde-Ruiz & Javier Díaz Giménez, 2010. "Eppur si Muove! Spain: Growing without a Model," Working Papers 2010-12, FEDEA.
  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. 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.
  15. Balmaseda, Manuel & Melguizo, Angel & Taguas, David, 2006. "Las reformas necesarias en el sistema de pensiones contributivas en España
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    ," MPRA Paper 19574, University Library of Munich, Germany, revised 01 Mar 2006.
  16. Gervais, Martin, 2012. "On the optimality of age-dependent taxes and the progressive U.S. tax system," Journal of Economic Dynamics and Control, Elsevier, vol. 36(4), pages 682-691.
  17. Altonji, Joseph G, 1986. "Intertemporal Substitution in Labor Supply: Evidence from Micro Data," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages S176-S215, June.
  18. 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.
  19. 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).
  20. 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.
  21. 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.
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