IDEAS home Printed from
   My bibliography  Save this paper

Theoretical Aspects of Retirement Decisions


  • Miroslav Verbic

    (University of Maribor, Slovenia - Faculty of Economics and Business)


Paper presents a survey of five different approaches to retirement decision analysis. Simple life cycle labour supply model leads to a classical optimization problem of choice between work and leisure, but it is highly limited in explaining retirement decision as a static approach. Comparative static version of this model enables the determination of income, wealth and social security on retirement decisions, but does not include neither the preference parameters of the individual or the expected value of future income flows. Merely the first problem can be solved by the reservation wage approach, but both problems are soluble by implementing a dynamic programming model. As an alternative to the latter, an option value approach is also discussed, which highly decreases the complexity, but does not lose a lot of reliability of the dynamic programming model.

Suggested Citation

  • Miroslav Verbic, 2002. "Theoretical Aspects of Retirement Decisions," Microeconomics 0201004, EconWPA.
  • Handle: RePEc:wpa:wuwpmi:0201004
    Note: Type of Document - Adobe PDF; prepared on IBM PC; to print on HP; pages: 40; figures: included. Paper is in Slovenian language. Available also in English language (contact author).

    Download full text from publisher

    File URL:
    Download Restriction: no

    More about this item


    ageing; dynamic programming model; early retirement; income effect; labour force participation; life cycle labour supply model; option value approach; pension; reservation wage; retirement decision; social security; substitution effect;

    JEL classification:

    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpmi:0201004. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.