Mortality transition and differential incentives for early retirement

D'Albis, Hippolyte; Lau, Paul S.; Sanchez-Romero, Miguel

D'Albis, Hippolyte; Lau, Paul S.; Sanchez-Romero, Miguel (2012), Mortality transition and differential incentives for early retirement, Journal of Economic Theory, 147, 1, p. 261-283. http://dx.doi.org/10.1016/j.jet.2011.11.004

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Type

Article accepté pour publication ou publié

Date

2012

Journal name

Journal of Economic Theory

Volume

147

Number

Publisher

Elsevier

Pages

261-283

Abstract (EN)

Many studies specify human mortality patterns parametrically, with a parameter change affecting mortality rates at different ages simultaneously. Motivated by the stylized fact that a mortality decline affects primarily younger people in the early phase of mortalitytransition but mainly older people in the later phase, we study how a mortality change at an arbitrary age affects optimal retirement age. Using the Volterra derivative for a functional, we show that mortality reductions at older ages delay retirement unambiguously, but that mortality reductions at younger ages may lead to earlierretirement due to a substantial increase in the individualʼs expected lifetime human wealth.

Subjects / Keywords

incentive for early retirement; lifetime human wealth effect; years-to-consume effect; mortality decline

JEL

D91 - Intertemporal Household Choice; Life Cycle Models and Saving
J11 - Demographic Trends, Macroeconomic Effects, and Forecasts
J26 - Retirement; Retirement Policies