MORTALITY DECLINE, RETIREMENT AGE, AND AGGREGATE SAVINGS

2014 ◽  
Vol 20 (3) ◽  
pp. 715-736 ◽  
Author(s):  
Yanyou Chen ◽  
Sau-Him Paul Lau
Keyword(s):  
Life Expectancy ◽  
Overlapping Generations ◽  
Survival Function ◽  
Mortality Decline ◽  
Retirement Age ◽  
Overlapping Generations Model ◽  
Future Behavior ◽  
Life Expectancy Increase ◽  
One Year ◽  
Endogenous Retirement

We use an overlapping-generations model with endogenous retirement and saving to study the trade-off between saving and retirement age in response to mortality decline. When life expectancy increases by one year, people delay retirement by about four months. With this magnitude of delay in retirement age, the percentage of lifetime spent in working decreases, and people have to save more for postretirement years. Neither the pure form of sole adjustment through savings nor the proportionality hypothesis is consistent with our results, but the proportionality hypothesis is a better rule of thumb in predicting future behavior. Our choice of the modified Boucekkine et al. (2002) survival function gives a convenient one-to-one correspondence between life expectancy increase and a change in the survival parameter.

scholarly journals ADULT LONGEVITY AND GROWTH TAKEOFF

2014 ◽  
Vol 20 (1) ◽  
pp. 165-188 ◽  
Author(s):  
Daishin Yasui
Keyword(s):  
Life Cycle ◽  
Life Expectancy ◽  
Early Retirement ◽  
Overlapping Generations ◽  
Working Life ◽  
Adult Longevity ◽  
Overlapping Generations Model ◽  
Fertility Decisions ◽  
Retirement Decisions ◽  
Positive Effect

This paper develops an overlapping-generations model in which agents make educational and fertility decisions under life-cycle considerations and retirement from work is distinguished from death. Gains in adult longevity induce agents to decrease fertility, invest in education, and achieve higher income in order to save more for retirement. Even if working life is shortened by early retirement, this mechanism works as long as adult longevity increases sufficiently. Our model can explain the positive effect of life expectancy on education without contradicting the fact that working life length has not substantially increased, because of retirement. We also provide new insights into the interaction between fertility and retirement decisions.

scholarly journals Pension policies in a model with endogenous fertility

2018 ◽  
Vol 19 (1) ◽  
pp. 109-125 ◽  
Author(s):  
GIAM PIETRO CIPRIANI ◽  
FRANCESCO PASCUCCI
Keyword(s):  
Overlapping Generations ◽  
Pension System ◽  
Retirement Age ◽  
Endogenous Fertility ◽  
Contribution Rate ◽  
Negative Effects ◽  
Overlapping Generations Model ◽  
The Social ◽  
Policy Measures ◽  
Set Up

AbstractWe set up an overlapping-generations model with endogenous fertility to study pensions policies in an ageing economy. We show that an increasing life expectancy may not be detrimental for the economy or the pension system itself. On the other hand, conventional policy measures, such as increasing the retirement age or changing the social security contribution rate could have undesired general equilibrium effects. In particular, both policies decrease capital per worker and might have negative effects on the fertility rate, thus exacerbating population ageing.

scholarly journals OPTIMAL PAY-AS-YOU-GO SOCIAL SECURITY WITH ENDOGENOUS RETIREMENT

2017 ◽  
Vol 23 (2) ◽  
pp. 870-887
Author(s):  
Koichi Miyazaki
Keyword(s):  
Decision Making ◽  
Social Security ◽  
Labor Productivity ◽  
Growth Model ◽  
Early Retirement ◽  
Overlapping Generations ◽  
Social Planner ◽  
Overlapping Generations Model ◽  
Optimal Allocations ◽  
Endogenous Retirement

This paper considers an overlapping-generations model with pay-as-you-go social security and retirement decision making by an old agent. In addition, this paper assumes that labor productivity depreciates. Under this setting, socially optimal allocations are examined. The first-best allocation is an allocation that maximizes welfare when a social planner distributes resources and forces an old agent to work and retire as she wants. The second-best allocation is one that maximizes welfare when a social planner can use only pay-as-you-go social security in a decentralized economy. This paper finds a range of an old agent's labor productivity such that the first-best allocation is achieved in a decentralized economy. This finding differs from that in Michel and Pestieau [“Social security and early retirement in an overlapping-generations growth model”, Annals of Economics & Finance, 2013], which notes that the first-best allocation cannot be achieved in a decentralized economy.

scholarly journals POSTPONING RETIREMENT AND SOCIAL SECURITY IN A TWO-SECTOR MODEL

2021 ◽  
pp. 1-19
Author(s):  
PARTHA SEN
Keyword(s):  
Steady State ◽  
Social Security ◽  
Capital Accumulation ◽  
Overlapping Generations ◽  
Retirement Age ◽  
Overlapping Generations Model ◽  
Payroll Tax ◽  
Tax Rate ◽  
Sector Model ◽  
State Capital

Pay-as-you-go social security schemes in the Organisation for Economic Co-operation and Development countries are facing solvency problems, as people are living longer and birth rates have declined. Postponing the full retirement age (FRA), when retirees are entitled to full pension, has been proposed as a solution. This effectively lowers the payroll tax rate since pension is paid only in the post-FRA period. In a two-period two-sector overlapping generations model, I show that this shift lowers savings (because a part of the expected old-age income is consumed in the first period), as employment increases. In the transition to the new steady state, capital is decumulated and the wage rate falls. Contrast this with a reduction of the payroll tax rate where the initial old suffer reduced consumption, but the young have higher post-tax income and this spurs capital accumulation.

scholarly journals LONGEVITY, GROWTH, AND INTERGENERATIONAL EQUITY: THE DETERMINISTIC CASE

2015 ◽  
Vol 20 (4) ◽  
pp. 985-1021 ◽  
Author(s):  
Torben M. Andersen ◽  
Marias H. Gestsson
Keyword(s):  
Overlapping Generations ◽  
Well Being ◽  
Intergenerational Equity ◽  
Future Generations ◽  
Burden Sharing ◽  
Retirement Age ◽  
Overlapping Generations Model ◽  
Policy Debates ◽  
Age Dependency Ratio ◽  
Policy Proposals

Challenges raised by aging (increasing longevity) have prompted policy debates featuring policy proposals justified by reference to some notion of intergenerational equity. However, very different policies ranging from presavings to indexation of retirement ages have been justified in this way. We develop an overlapping-generations model in continuous time that encompasses different generations with different mortality rates and thus longevity. Allowing for trend increases in both longevity and productivity, we address the normative issue of intergenerational equity under a utilitarian criterion when future generations are better off in terms of both material and nonmaterial well-being. Increases in productivity and longevity are shown to have very different implications for intergenerational distribution. Further, the socially optimal retirement age, dependency ratio, and intergenerational burden sharing in the case of a trend increase in longevity are shown to depend on how individuals' utility for time/leisure is affected by age and longevity.

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