The Economics of Early Retirement

Posted: 27 Jun 2001


The trend in most of the industrialized counties is in the direction of decreasing labor force participation of older workers. The steady withdrawal of workers from the workforce at a younger age suggests that retirement income is gradually increasing and/or that older workers are increasingly being forced out of the labor market. Regardless of whether early retirement can be traced to the labor supply or the labor demand side of the labor market, it constitutes a withdrawal of resources from production, a lowered tax base, and an increased burden on pension and fiscal systems. This paper identifies and discusses alternative theories on why people retire early.

Keywords: Early retirement, labor supply/demand, foregone output

JEL Classification: H55, J14, J21, J26

Suggested Citation

Herbertsson, Tryggvi Thor, The Economics of Early Retirement. Journal of Pensions Management, Vol. 6, No. 4, July 2001. Available at SSRN:

Tryggvi Thor Herbertsson (Contact Author)

University of Reykjavik ( email )

+354 8613162 (Phone)


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