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The optimal legal retirement age in an OLG model with endogenous labour supply

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The long run welfare implications of the legal retirement age are studied in a perfect foresight overlapping-generations model where agents live for two periods. Agents’ lifetime is divided between working life and retirement by a legal retirement age controlled by the government whereas agents, besides savings, control the intensive margin or "yearly" labour supply. The legal retirement age is utilized to dampen distortionary effects of payroll taxes and public pension annuities and promote capital accumulation. We show that a social optimal legal retirement age exists and how it depends on whether payroll taxes or benefit annuities ensures budget balance of the PAYG pension system.

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  • Hansen, Casper Worm & Lønstrup, Lars, 2009. "The optimal legal retirement age in an OLG model with endogenous labour supply," Discussion Papers on Economics 5/2009, University of Southern Denmark, Department of Economics.
    • Handle: RePEc:hhs:sdueko:2009_005
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    Cited by:

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    2. Tran, Quang-Thanh, 2022. "The aging tax on potential growth in Asia," Journal of Asian Economics, Elsevier, vol. 81(C).
    3. Filip Chybalski, 2016. "The Multidimensional Efficiency of Pension System: Definition and Measurement in Cross-Country Studies," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 128(1), pages 15-34, August.
    4. Séverine Arnold & Anca Jijiie, 2020. "Retirement Ages by Socio-Economic Class," Risks, MDPI, vol. 8(4), pages 1-40, October.
    5. Harry ter Rele, 2019. "The effect of demographic developments and growth on the optimal statutory retirement age," CPB Discussion Paper 403, CPB Netherlands Bureau for Economic Policy Analysis.

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    More about this item

    Keywords

    Optimal legal retirement age; pay-as-you-go-pension systems; overlapping-generations model;
    All these keywords.

    JEL classification:

    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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