The Evolution of Retirement

IGIER Working Paper No. 278

32 Pages Posted: 17 Jan 2005

See all articles by Vincenzo Galasso

Vincenzo Galasso

University of Lugano; Centre for Economic Policy Research (CEPR)

Paola Profeta

Bocconi University - Department of Policy Analysis and Public Management; CESifo (Center for Economic Studies and Ifo Institute)

J. Ignacio Conde-Ruiz

Foundation for Applied Economic Research (FEDEA)

Multiple version iconThere are 2 versions of this paper

Date Written: January 2005

Abstract

We provide a long term perspective on the individual retirement behavior and on the future of early retirement. In a cross-country sample, we find that total pension spending depends positively on the degree of early retirement and on the share of elderly in the population, which increase the proportion of retirees, but has hardly any effect on the per-capita pension benefits. We show that in a Markovian political economic theoretical framework, in which incentives to retire early are embedded, a political equilibrium is characterized by an increasing sequence of social security contribution rates converging to a steady state and early retirement. Comparative statics suggest that aging and productivity slow-downs lead to higher taxes and more early retirement. However, when income effects are factored in, the model suggests that periods of stagnation - characterized by decreasing labor income - may lead middle aged individuals to postpone retirement.

Keywords: Pensions, lifetime income effect, tax burden, politico-economic Markovian equilibrium

JEL Classification: H53, H55, D72

Suggested Citation

Galasso, Vincenzo and Profeta, Paola and Conde-Ruiz, J. Ignacio, The Evolution of Retirement (January 2005). IGIER Working Paper No. 278. Available at SSRN: https://ssrn.com/abstract=649565 or http://dx.doi.org/10.2139/ssrn.649565

Vincenzo Galasso (Contact Author)

University of Lugano ( email )

Via Giuseppe Buffi 13
Lugano, 6900
Switzerland

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Paola Profeta

Bocconi University - Department of Policy Analysis and Public Management ( email )

Via Roentgen 1
Milan, 20136
Italy

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

J. Ignacio Conde-Ruiz

Foundation for Applied Economic Research (FEDEA) ( email )

Jorge Juan 46
Madrid, 28001
Spain
+34 91 435 9020 (Phone)
+34 91 577 9575 (Fax)

Register to save articles to
your library

Register

Paper statistics

Downloads
79
Abstract Views
1,226
rank
272,377
PlumX Metrics