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Retirement in a Life Cycle Model of Labor Supply with Home Production

  • Richard Rogerson

    (Arizona State University)

  • Johanna Wallenius

    (Arizona State University)

We analyze the forces that can generate retirement in different versions of standard life cycle models of labor supply. While nonconvexities in production can generate retirement, we show that the size of nonconvexities needed increases sharply as the intertemporal elasticity of substitution for labor decreases. In a model with home production, we show that these models imply a large increase in time devoted to home production at retirement. This is contrary to what is found in the ATUS data. We suggest that nonconvexities in the enjoyment of leisure time may be a promising alternative feature to generate retirement.

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File URL: http://www.mrrc.isr.umich.edu/publications/Papers/pdf/wp205.pdf
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Paper provided by University of Michigan, Michigan Retirement Research Center in its series Working Papers with number wp205.

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Length: 60 pages
Date of creation: Sep 2009
Date of revision:
Handle: RePEc:mrr:papers:wp205
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  17. Susumu Imai & Michael P. Keane, 2004. "Intertemporal Labor Supply and Human Capital Accumulation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(2), pages 601-641, 05.
  18. John Laitner & Dan Silverman, 2005. "Estimating Life-Cycle Parameters from Consumption Behavior at Retirement," NBER Working Papers 11163, National Bureau of Economic Research, Inc.
  19. Gilbert Ghez & Gary S. Becker, 1975. "The Allocation of Time and Goods over the Life Cycle," NBER Books, National Bureau of Economic Research, Inc, number ghez75-1, October.
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