Longevity and Schooling: The Case of Retirement

30 Pages Posted: 18 Oct 2012

See all articles by Nina Boberg-Fazlic

Nina Boberg-Fazlic

University of Copenhagen - Department of Economics

Date Written: September 1, 2012

Abstract

It is often conjectured that higher life expectancy leads to longer schooling. The reasoning behind this notion is that a longer lifespan increases the recovery period of human capital investment and thus, makes it more profitable to invest in education. This notion goes back to Ben-Porath (1967) and is therefore often termed the Ben-Porath mechanism. However, the original Ben-Porath mechanism concerns the length of economic life and not the length of life per se. This distinction is important in the presence of retirement and especially so as earlier retirement ages are observed in many western countries. This paper presents an overlapping generations model including both an educational and a retirement decision, thereby being able to test the Ben-Porath mechanism using the correct definition of length of working life. It is found that an increase in life expectancy does not necessarily increase the expected length of economic life as also early retirement can occur. Schooling still increases, however not due to the increase in the recovery horizon but due to an increase in the probability of surviving the recovery period.

Keywords: longevity, human capital, retirement, overlapping generations

JEL Classification: D91, I20, J10, J26

Suggested Citation

Boberg-Fazlic, Nina, Longevity and Schooling: The Case of Retirement (September 1, 2012). Univ. of Copenhagen Dept. of Economics Discussion Paper No. 12-15, Available at SSRN: https://ssrn.com/abstract=2163429 or http://dx.doi.org/10.2139/ssrn.2163429

Nina Boberg-Fazlic (Contact Author)

University of Copenhagen - Department of Economics ( email )

Ă˜ster Farimagsgade 5
Bygning 26
1353 Copenhagen K.
Denmark

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