Download This PaperFlexible Retirement and Optimal Taxation
105 Pages Posted: 24 Oct 2017 Last revised: 17 Aug 2020
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Flexible Retirement and Optimal Taxation
Flexible Retirement and Optimal Taxation
Date Written: November 5, 2018
Abstract
This paper studies optimal insurance against idiosyncratic wage shocks in a life cycle model with intensive labor supply and endogenous retirement. When the fixed cost of work is increasing in wage, the optimal retirement wedge provides stronger incentives for delayed retirement with age. Retirement benefits that resemble the US Social Security system can implement the optimum. Calibrated numerical simulations suggest that a mix of retirement benefits that increase with claiming age, and age-dependent linear taxes, is close to optimal.
Keywords: Retirement, Optimal Taxation, Social Security
JEL Classification: H21, H55, J26
Suggested Citation: Suggested Citation