Echevarria, C.A. (2004) Life Expectancy, Schooling Time, Retirement, and Growth. Economic Inquiry, 42, 602-617.
AUTHORS: Kuo-Ting Hua
ABSTRACT: Population aging alters decisions of retirement and intergenerational transfers simultaneously. With the consideration of both decisions, this paper investigates the economic impacts of population aging in an Overlapping-Generation (OLG) model under social security coverage. Results show that the economy grows slower with voluntarily increased elderly labor supply than otherwise. Ignoring the interactions between these decisions may lead to a serious mis-estimation. Results also show that mandatory postponing retirement creates disincentive to saving and hinders the economy. To prevent the economy from slowing down and fertility from falling, mandatory postponing retirement must be accompanied by a lower replacement ratio.