Hostname: page-component-848d4c4894-8bljj Total loading time: 0 Render date: 2024-07-08T03:01:17.216Z Has data issue: false hasContentIssue false
  • English
  • Français

Pension Reforms, Population Aging, and Retirement Decision of the Elderly in a Neoclassical Growth Model

Published online by Cambridge University Press:  14 July 2021

Makoto Hirono  and
Kazuo Mino
Makoto Hirono
Affiliation:
Faculty of Policy Studies, Tokushima Bunri University, Yamashiro-cho, Tokushima, 770-8055 Japan
Kazuo Mino*
Affiliation:
Institute of Economic Research, Kyoto University, Yoshida Honmachi, Sakyo-ku, Kyoto, 606-8501 Japan
*
*Corresponding author. Email: mino@kier.kyoto-u.ac.jp
Get access Rights & Permissions [Opens in a new window]

Abstract

This study explores the linkage between the labor force participation of the elderly and the long-run performance of the economy in the context of a two-period-lived overlapping generations model. We assume that the old agents are heterogeneous in their labor efficiency and they continue working if their income exceeds the pension that can be received in the case of full retirement. We first inspect the key factors that determine the retirement decision of the elderly. We then examine analytically as well as numerically the long-run impact of labor participation of the elderly on capital accumulation and income distribution.

Keywords

Retirement decisionlabor force participationpopulation agingpension systemcapital accumulationE10E62
Type
Articles
Information
Macroeconomic Dynamics , Volume 27 , Issue 2 , March 2023 , pp. 275 - 296
Copyright
© Cambridge University Press 2021

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Aisa, R., Larramona, G. and Pueyo, F. (2015) Active aging, preventive health and dependency: Heterogeneous workers’ differential behavior. Journal of Economic Behavior and Organization 117, 1–9.CrossRefGoogle Scholar
Berkel, B. and Börsch-Supan, A. (2004) Pension reform in Germany: The impact on retirement decisions. FinanzArchiv/Public Finance Analysis 60, 393–421.CrossRefGoogle Scholar
Bottazzi, B., Jappeli, T. and Padula, M. (2006) Retirement expectations, pension reforms and their impact on private wealth accumulation. Journal of Public Economics 90, 2187–2212.CrossRefGoogle Scholar
Bovini, G. (2018) Prime-age labor supply responses to the transition from a DB to a NDC public pension system: Evidence from Italy, unpublished manuscript.Google Scholar
Cai, L. (2007) The Relationship Between Health and Labour Force Participation: Evidence from a Panel Data Simultaneous Equation Model. Melbourne Institute Working Paper No. 1/07.CrossRefGoogle Scholar
Cipriani, P. (2014) Population aging and PAYG pension the OLG model. Journal of Population Economics 27, 251–256.CrossRefGoogle Scholar
Cipriani, G. (2018), Aging, retirement and pay-as-you-go pensions. Macroeconomic Dynamics 22, 1173–1183.CrossRefGoogle Scholar
Coile, C. (2015) Economic determinants of workers’ retirement decisions. Journal of Economic Surveys 29, 830–853.CrossRefGoogle Scholar
Coile, C. and Levine, P. (2018) Recessions, retirement, and social security. American Economic Review 101, Paper and Proceedings, 23–28.Google Scholar
Diamond, P. (1965) National debt in a neoclassical growth model. American Economic Review 55, 1126–1150.Google Scholar
Diamond, P. and Mirrlees, J. (1978) A model of social insurance with variable retirement. Journal of Political Economy 10, 295–336.Google Scholar
Gaca-Pèrez, I., Jimeèez-Martn, S. and Sànchez-Martn, A. (2013) Retirement incentives, individual heterogeneity and labor transitions employed and unemployed workers. Labor Economics 20, 106–120.CrossRefGoogle Scholar
Gong, L. and Liu, N. (2012) A note on a one sector neoclassical growth model with endogenous retirement: Existence of multiple steady states. Japanese Economic Review 63, 557–569.CrossRefGoogle Scholar
Gruber, J. and Wise, D. (1998) Social security and retirement: International comparison. American Economic Review 88, Paper and Proceedings, 158–163.Google Scholar
Gruber, J. and Wise, D. (eds.) (1999) Social Security and Retirement Around the World. University of Chicago Press.Google Scholar
Gruber, J. and Wise, D. (eds.) (2004) Social Security Programs and Retirement Around the World: Micro Estimation. University of Chicago Press.Google Scholar
Gruber, J. and Wise, D. (eds.) (2007). Social Security Programs and Retirement Around the World: Fiscal Implications. University of Chicago Press.CrossRefGoogle Scholar
Higuchi, Y., Kurosawa, K. and Matsuura, Y. (2006) On the Effect of Pension Reform on the Labor Supply of the Male Elderly. Discussion Paper 06-J_033, Research Institute of Economy, Trade and Industry (in Japanese).Google Scholar
Hirazawa, M. and Yakita, A. (2017) Labor supply of elderly people, fertility, and economic development. Journal of Macroeconomics 51, 75–96.CrossRefGoogle Scholar
Hu, S.-C. (1979) Social security, the supply of labor, and capital accumulation. American Economic Review 69, 274–283.Google Scholar
Kalwij, A. and Vwermeulen, F. (2008) Health and labor force participation of older people in Europe: What do objective health indicators add to the analysis? Health Economics 17, 619–638.CrossRefGoogle ScholarPubMed
Kitao, S. (2014) Sustainable social security: Four options. Review of Economic Dynamics 17, 756–779.CrossRefGoogle Scholar
Kitao, S. (2015) Pension reform and individual retirement accounts in Japan. Journal of The Japanese and International Economies 38, 111–126.CrossRefGoogle Scholar
Krueger, A. and Pischke, J.-H. (1992) The effect of social security on labor supply: A cohort analysis of the notch generations. Journal of Labor Economics 10, 412–437.CrossRefGoogle Scholar
Mankiw, N., Romer, D. and Weil, D. (1995) A contribution to the empirics of economic growth. Quarterly Journal of Economics 107, 407–437.CrossRefGoogle Scholar
Matsuyama, K. (2008) A one-sector neoclassical growth model with endogenous retirement. Japanese Economic Review 59, 139–155.CrossRefGoogle Scholar
Mete, C. and Schultz, P. (2002) Health and Labor Force Participation of the Elderly in Taiwan. Growth Center Discussion Paper No. 846, Yale University.Google Scholar
Mizuno, M. and Yakita, A. (2013) Elderly labor supply and fertility decision in aging-population economies. Economics Letters 121, 395–399.CrossRefGoogle Scholar
Miyazaki, K. (2014) The effects of raising the official pension-age policy in an overlapping generations economy. Economics Letters 121, 329–332.CrossRefGoogle Scholar
Miyazaki, K. (2017) Optimal pay-as-you-go social security with endogenous retirement. Macroeconomic Dynamics 23(2), 870–887.CrossRefGoogle Scholar
Nishiyama, S. (2015) Fiscal policy effects in a heterogeneous agent OLG economy with aging population. Journal of Economic Dynamics and Control 61, 114–132.CrossRefGoogle Scholar
Philippe, M. and Pestieau, P. (2013) Social security and early retirement in an overlapping generations growth model. Annals of Economics and Finance 14, 705–719.Google Scholar
Oshio, T, Oishi, A. and Shimizutani, S. (2011) Does social security induce withdrawal of the old from the labor force and create jobs for the young?: The case of Japan. Japanese Economic Review 62, 248–271.CrossRefGoogle Scholar
Seiyama, K. (2016) Income Disparity among Elderly in Japan. IASR Working Paper No.1, Institute for Advanced Social Research, Kwansei Gakuin University.Google Scholar
Shimizutani, S. (2013) Social security earnings test and the labour supply of the elderly: New evidence from unique survey responses in Japan. Japanese Economic Review 64, 399–413.CrossRefGoogle Scholar
Shimizutani, T. and Oshio, T. (2013) Revisiting the labor supply effect of social security earnings test: New evidence from its elimination and reinstatement in Japan. Japan and the World Economy 28, 99–111.CrossRefGoogle Scholar
Shirahase, S. (2015) Income inequality among older people in rapidly aging Japan. Research in Social Stratification and Mobility 41, 1–10.CrossRefGoogle Scholar
Zhang, J. and Zhang, J. (2009) Longevity, retirement, and capital accumulation in a recursive model with an application to mandatory retirement. Macroeconomic Dynamics 13, 327–348.CrossRefGoogle Scholar