A Theory of Retirement
41 Pages Posted: 29 Nov 2007
Date Written: November 2007
We construct a life-cycle model in which retirement occurs at the end of life as a result of declining health. We show that improvements in life expectancy, coupled with a delay in the onset of disability, increases both the optimal consumption level and the proportion of life spent in leisure. The retirement age increases proportionally less than the increase in life expectancy.
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