Hostname: page-component-586b7cd67f-rdxmf Total loading time: 0 Render date: 2024-11-26T07:09:21.494Z Has data issue: false hasContentIssue false
  • English
  • Français

LONGEVITY, RETIREMENT, AND CAPITAL ACCUMULATION IN A RECURSIVE MODEL WITH AN APPLICATION TO MANDATORY RETIREMENT

Published online by Cambridge University Press:  01 June 2009

Jie Zhang  and
Junsen Zhang
Jie Zhang*
Affiliation:
National University of Singapore and University of Queensland
Junsen Zhang
Affiliation:
National University of Singapore and University of Queensland
*
Address correspondence to: Jie Zhang, School of Economics, University of Queensland, Brisbane, Qld 4072, Australia; e-mail: [email protected].
Get access Rights & Permissions [Opens in a new window]

Abstract

This paper explores how retirement timing, together with life-cycle saving and human capital investment in children, responds to rising longevity in a recursive model with altruistic agents. We find that rising longevity raises the retirement age. If initial life expectancy is not too high, rising longevity also raises human capital investment in children and the saving rate. Through these channels, rising longevity can be conducive to long-run economic growth. A binding mandatory retirement age reduces human capital investment and the growth rate, raises the saving rate, and reduces welfare.

Keywords

LongevityGrowthLife-Cycle SavingRetirement
Type
Articles
Information
Macroeconomic Dynamics , Volume 13 , Issue 3 , June 2009 , pp. 327 - 348
Copyright
Copyright © Cambridge University Press 2009

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

REFERENCES

Ashenfelter, Orley and Card, David (2002) Did the elimination of mandatory retirement affect faculty retirement? American Economic Review 92, 957–980.CrossRefGoogle Scholar
Auerbach, Alan J. and Kotlikoff, Laurence J. (1992) The impact of the demographic transition on capital formation. Scandinavian Journal of Economics 94, 281–295.CrossRefGoogle ScholarPubMed
Barro Robert, J. and Sala-i-Martin, Xavier (1995) Economic Growth. New York: McGraw-Hill.Google Scholar
Becker, Gary S., Murphy, Kevin M., and Tamura, Robert (1990) Human capital, fertility, and economic growth. Journal of Political Economy 98, S12–S37.CrossRefGoogle Scholar
Blinder, Alan S., Gordon, Roger H., and Wise, Donald E. (1980). Reconsidering the work incentive effects of social security. National Tax Journal 34, 431–442.CrossRefGoogle Scholar
Bloom, David E., Canning, David, and Graham, Bryan (2003) Longevity and life-cycle savings. Scandinavian Journal of Economics 105, 319–338.CrossRefGoogle Scholar
Boskin, Michael J. (1977) Social security and retirement decisions. Economic Inquiry 15, 1–23.CrossRefGoogle Scholar
Boucekkine, Raouf, de la Croix, David, and Licandro, Omar (2002) Vintage human capital, demographic trends, and endogenous growth. Journal of Economic Theory 104, 340–375.CrossRefGoogle Scholar
de la Croix, David and Licandro, Omar (1999) Life expectancy and endogenous growth. Economics Letters 65, 255–263.CrossRefGoogle Scholar
Echevarría, Cruz A. (2004) Life expectancy, schooling time, retirement, and growth. Economic Inquiry 42, 602–617.CrossRefGoogle Scholar
Eckstein, Zvi and Wolpin, Kenneth I. (1985) Endogenous fertility and optimal population size. Journal of Public Economics 27, 93–106.CrossRefGoogle Scholar
Ehrlich, Isaac and Lui, Francis T. (1991) Intergenerational trade, longevity, and economic growth. Journal of Political Economy 99, 1029–1060.CrossRefGoogle Scholar
Fries, J.F. (1980) Aging, natural death and the compression of morbidity. New England Journal of Medicine 303, 130–135.CrossRefGoogle ScholarPubMed
Gunderson, Morley and Riddell, W. Craig (1993) Labor Market Economics. Third Edition. New York: McGraw-Hill.Google Scholar
Gustman, Alan L. and Steinmeier, Thomas L. (1986) A structural retirement model. Econometrica 54, 555–584.CrossRefGoogle Scholar
Hammermesh, Daniel S. (1993) Labor Demand. Princeton, NJ: Princeton University Press.CrossRefGoogle Scholar
Hammermesh, Daniel S. (1985) Expectation, life expectancy, and economic behavior. Quarterly Journal of Economics 100 (2), 389–408.CrossRefGoogle Scholar
Hu, Sheng-Cheng (1979) Social security, the supply of labor, and capital accumulation. American Economic Review 69, 274–283.Google Scholar
Hu, Sheng-Cheng (1995) Demographics, productivity growth and the macroeconomic equilibrium. Economic Inquiry 33 (4), 592–610.CrossRefGoogle Scholar
Hurd, Michael D. (1997) The economics of individual aging. In Rosenzweig, Mark R. and Stark, Oded (eds.), Handbook of Population and Family Economics, pp. 891–966. New York: Elsevier Science.CrossRefGoogle Scholar
Kahn, James A. (1988) Social security, liquidity, and early retirement. Journal of Public Economics 35, 97–117.CrossRefGoogle Scholar
Lazear, Edward P. (1986) Retirement from the labor force. In Ashenfelter, Orley and Layard, Richard (eds.), Handbook of Labor Economics, pp. 305–355. Amsterdam: North-Holland.CrossRefGoogle Scholar
Lee, Ronald and Skinner, Jonathan (1999) Will baby boomers bust the federal budget? Journal of Economic Perspectives 13 (1), 117–140.CrossRefGoogle Scholar
Lumsdaine, Robin L. and Mitchell, Olivia S. (1999) New developments in the economic analysis of retirement. In Ashenfelter, Orley and Card, David (eds.), Handbook of Labor Economics, Vol. 3C, pp. 3261–3307. New York: Elsevier Science.Google Scholar
Lumsdaine, Robin L., Stock, James H., and Wise, David A. (1992) Three models of retirement: Computational complexity versus predictive validity. In Wise, David (ed.), Topics in the Economics of Aging, pp. 21–57. Chicago: University of Chicago Press.Google Scholar
Sheshinski, Eytan (1978) A model of social security and retirement decisions. Journal of Public Economics 10, 337–360.CrossRefGoogle Scholar
Stock, James H. and Wise, David A. (1990) Pensions, the option value of work and retirement. Econometrica 58, 1151–1180.CrossRefGoogle Scholar
U.S. Census Bureau (2000, 2001) Statistical Abstract of the United States. Washington, DC: U.S. Government Printing Office.Google Scholar
U.S. Bureau of Labor Statistics (2001) Civilian Labor Force Participation Rates by Sex, Age, Race, and Hispanic Origin. Washington, DC: Office of Occupation Statistics and Employment Projections.Google Scholar
Wilmoth, J.R., Deegan, L.J., Lundstrom, H., and Horiuchi, S. (2000). Increase of maximum life-span in Sweden, 1961–1999. Science 289, 2366–2368.CrossRefGoogle Scholar
Zhang, Jie and Zhang, Junsen (2005) The effect of life expectancy on fertility, saving, schooling and economic growth: Theory and evidence. Scandinavian Journal of Economics 107, 45–66.CrossRefGoogle Scholar
Zhang, Junsen, Zhang, Jie, and Lee, Ronald (2001) Mortality decline and long-run economic growth. Journal of Public Economics 80, 485–507.CrossRefGoogle Scholar
Zhang, Jie, Zhang, Junsen, and Lee, Ronald (2003) Rising longevity, education, savings, and growth. Journal of Development of Economics 70, 83–101.CrossRefGoogle Scholar