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The Genesis of the Golden Age - Accounting for the Rise in Health and Leisure

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Listed author(s):
  • Carl-Johan Dalgaard

    (Department of Economics, University of Copenhagen)

  • Holger Strulik

    (University of Goettingen, Department of Economics)

Abstract

We develop a life cycle model featuring an optimal retirement decision in the presence of physiological aging. In modeling the aging process we draw on recent advances within the fields of biology and medicine. In the model individuals decide on optimal consumption during life, the age of retirement, and (via health investments) the timing of their death. Accordingly, "years in retirement" is fully endogenously determined. Using the model we can account for the evolution of age of retirement and longevity across cohorts born between 1850 and 1940 in the US. Our analysis indicates that 2/3 of the observed increase in longevity can be accounted for by wage growth, whereas the driver behind the observed rising age of retirement appears to have been technological change in health care. Both technology and income contribute to the rise in years in retirement, but the contribution from income is slightly greater.

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Paper provided by University of Copenhagen. Department of Economics in its series Discussion Papers with number 12-10.

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Length: 31 pages
Date of creation: Aug 2012
Handle: RePEc:kud:kuiedp:1210
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Keywords: Aging; Longevity; Retirement; Health; Health Technology;

Other versions of this item:

Find related papers by JEL classification:
  • D91 - Microeconomics - - Intertemporal Choice - - - Intertemporal Household Choice; Life Cycle Models and Saving
  • I15 - Health, Education, and Welfare - - Health - - - Health and Economic Development
  • J17 - Labor and Demographic Economics - - Demographic Economics - - - Value of Life; Foregone Income
  • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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Cited by:

  1. Schünemann, Johannes & Strulik, Holger & Trimborn, Timo, 2016. "The gender gap in mortality: How much is explained by behavior?," ECON WPS - Vienna University of Technology Working Papers in Economic Theory and Policy 05/2016, Vienna University of Technology, Institute for Mathematical Methods in Economics, Research Group Economics (ECON).
  2. Trimborn, Timo & Schünemann, Johannes & Strulik, Holger, 2016. "Disentangling the Gender Gap in Longevity," Annual Conference 2016 (Augsburg): Demographic Change 145570, Verein für Socialpolitik / German Economic Association.
  3. Volker Grossmann & Holger Strulik, 2015. "Optimal Social Insurance and Health Inequality," CESifo Working Paper Series 5604, CESifo Group Munich.
  4. Schünemann, Johannes & Strulik, Holger & Trimborn, Timo, 2015. "Going from bad to worse: Adaptation to poor health, health spending, longevity, and the value of life," Center for European, Governance and Economic Development Research Discussion Papers 268, University of Goettingen, Department of Economics.
  5. Kuhn, Michael & Wrzaczek, Stefan & Prskawetz, Alexia & Feichtinger, Gustav, 2015. "Optimal choice of health and retirement in a life-cycle model," Journal of Economic Theory, Elsevier, vol. 158(PA), pages 186-212.
  6. Holger Strulik & Katharina Werner, 2016. "50 is the new 30—long-run trends of schooling and retirement explained by human aging," Journal of Economic Growth, Springer, vol. 21(2), pages 165-187, June.
  7. Holger STRULIK, 2015. "A Closed-form Solution for the Health Capital Model," JODE - Journal of Demographic Economics, Cambridge University Press, vol. 81(3), pages 301-316, September.
  8. Strulik, Holger, 2015. "The health hump," Center for European, Governance and Economic Development Research Discussion Papers 263, University of Goettingen, Department of Economics.

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