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The Effect of Social Security, Health, Demography and Technology on Retirement

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  • Ferreiray, Pedro Cavalcanti
  • Santos, Marcelo Rodrigues

Abstract

This article studies the determinants of the labor force participation of the elderly and investigates the factors that may account for the increase in retirement in the second half of the last century. We develop a life-cycle general equilibrium model with endogenous retirement that embeds Social Security legislation and Medicare. Individuals are ex ante heterogeneous with respect to their preferences for leisure and face uncertainty about labor productivity, health status and out-of-pocket medical expenses. The model is calibrated to the U.S. economy in 2000 and is able to reproduce very closely the retirement behavior of the American population. It reproduces the peaks in the distribution of Social Security applications at ages 62 and 65 and the observed facts that low earners and unhealthy individuals retire earlier. It also matches very closely the increase in retirement from 1950 to 2000. Changes in Social Security policy - which became much more generous - and the introduction of Medicare account for most of the expansion of retirement. In contrast, the isolated impact of the increase in longevity was a delaying of retirement. (Copyright: Elsevier)

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Paper provided by Insper Working Paper, Insper Instituto de Ensino e Pesquisa in its series Insper Working Papers with number wpe_274.

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Date of creation: Oct 2012
Handle: RePEc:ibm:ibmecp:wpe_274
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Find related papers by JEL classification:
  • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
  • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
  • D5 - Microeconomics - - General Equilibrium and Disequilibrium

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Cited by:

  1. Lorenzo Burlon & Montserrat Vilalta-Bufí, 2016. "A new look at technical progress and early retirement," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 5(1), pages 1-39, December.
  2. Lorenzo Burlon & Montserrat Vilalta-Buf�, 2014. "Technical progress, retraining cost and early retirement," Temi di discussione (Economic working papers) 963, Bank of Italy, Economic Research and International Relations Area.
  3. Ferreira, Pedro Cavalcanti & Gomes, Diego Braz Pereira, 2016. "Health Care Reform or More Affordable Health Care?," FGV/EPGE Economics Working Papers (Ensaios Economicos da EPGE) 780, FGV/EPGE - Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).

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