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Mortality transition and differential incentives for early retirement

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  • d'Albis, Hippolyte
  • Lau, Paul
  • Sanchez-Romero, Miguel

Abstract

Many studies specify human mortality patterns parametrically, with a parameter change affecting mortality rates at different ages simultaneously. Motivated by the stylized fact that a mortality decline affects primarily younger people in the early phase of mortality transition but mainly older people in the later phase, we study how a mortality change at an arbitrary age affects optimal retirement age. Using the Volterra derivative for a functional, we show that mortality reductions at older ages delay retirement unambiguously, but that mortality reductions at younger ages may lead to earlier retirement due to a substantial increase in the individualʼs expected lifetime human wealth.
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Suggested Citation

  • d'Albis, Hippolyte & Lau, Paul & Sanchez-Romero, Miguel, 2010. "Mortality transition and differential incentives for early retirement," LERNA Working Papers 10.21.327, LERNA, University of Toulouse.
  • Handle: RePEc:ler:wpaper:10.21.327
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    References listed on IDEAS

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    9. Hippolyte D'Albis & Emmanuelle Augeraud-Veron, 2008. "Endogenous Retirement and Monetary Cycles," Mathematical Population Studies, Taylor & Francis Journals, vol. 15(4), pages 214-229.
    10. John Wilmoth & Shiro Horiuchi, 1999. "Rectangularization revisited: Variability of age at death within human populations," Demography, Springer;Population Association of America (PAA), vol. 36(4), pages 475-495, November.
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    Citations

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    Cited by:

    1. Sau-Him Lau, 2013. "Does longevity improvement always raise the length of schooling through the longer-horizon mechanism?," 2013 Meeting Papers 292, Society for Economic Dynamics.
    2. Matteo Cervellati & Uwe Sunde, 2013. "Life Expectancy, Schooling, and Lifetime Labor Supply: Theory and Evidence Revisited," Econometrica, Econometric Society, vol. 81(5), pages 2055-2086, September.
    3. Sánchez-Romero, Miguel & Sambt, Jože & Prskawetz, Alexia, 2013. "Quantifying the role of alternative pension reforms on the Austrian economy," Labour Economics, Elsevier, vol. 22(C), pages 94-114.
    4. Eric French & John Bailey Jones, 2017. "Health, Health Insurance, and Retirement: A Survey," Annual Review of Economics, Annual Reviews, vol. 9(1), pages 383-409, September.
    5. Matteo Cervellati & Uwe Sunde & Klaus F. Zimmermann, 2017. "Demographic dynamics and long-run development: insights for the secular stagnation debate," Journal of Population Economics, Springer;European Society for Population Economics, vol. 30(2), pages 401-432, April.
    6. Pierre Pestieau & Gregory Ponthiere, 2012. "The Public Economics of Increasing Longevity," Hacienda Pública Española, IEF, vol. 200(1), pages 41-74, March.
    7. Sánchez-Romero, Miguel & d׳Albis, Hippolyte & Prskawetz, Alexia, 2016. "Education, lifetime labor supply, and longevity improvements," Journal of Economic Dynamics and Control, Elsevier, vol. 73(C), pages 118-141.
    8. Lau, Sau-Him Paul, 2014. "Fertility and mortality changes in an overlapping-generations model with realistic demography," Economic Modelling, Elsevier, vol. 38(C), pages 512-521.
    9. Strulik, Holger & Werner, Katharina, 2012. "Life Expectancy, Labor Supply, and Long-Run Growth: Reconciling Theory and Evidence," Hannover Economic Papers (HEP) dp-497, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
    10. Nicolas Drouhin, 2018. "Theoretical considerations on the retirement consumption puzzle and the optimal age of retirement," Working Papers halshs-01767096, HAL.
    11. Pierre Pestieau & Grégory Ponthière, 2012. "The public economics of increasing longevity," Working Papers halshs-00676492, HAL.
    12. 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.
    13. repec:got:cegedp:141 is not listed on IDEAS
    14. Klaus Prettner & David Canning, 2014. "Increasing life expectancy and optimal retirement in general equilibrium," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 56(1), pages 191-217, May.
    15. repec:eee:mateco:v:72:y:2017:i:c:p:134-144 is not listed on IDEAS
    16. repec:eee:joecag:v:6:y:2015:i:c:p:5-12 is not listed on IDEAS
    17. 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.
    18. Sanchez-Romero, Miguel & Fürnkranz-Prskawetz, Alexia, 2017. "Redistributive effects of the US pension system among individuals with different life expectancy," ECON WPS - Vienna University of Technology Working Papers in Economic Theory and Policy 03/2017, Vienna University of Technology, Institute for Mathematical Methods in Economics, Research Group Economics (ECON).
    19. Heijdra, Ben J. & Reijnders, Laurie S. M., 2018. "Longevity shocks with age-dependent productivity growth," Journal of Pension Economics and Finance, Cambridge University Press, vol. 17(02), pages 200-230, April.

    More about this item

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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