The effect of social security, health, demography and technology on retirement

Ferreira, Pedro Cavalcanti and Rodrigues Dos Santos, Marcelo (2013) The effect of social security, health, demography and technology on retirement. Review of Economic Dynamics, 16 (2). pp. 350-370. ISSN 1094-2025

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This article studies the determinants of the labor force participation of the elderly and investigates the factors that may account for the increase in retirement in the second half of the last century. We develop a lifecycle general equilibrium model with endogenous retirement that embeds Social Security legislation and Medicare. Individuals are ex ante heterogeneous with respect to their preferences for leisure and face uncertainty about labor productivity, health status and out-of-pocket medical expenses. The model is calibrated to the U.S. economy in 2000 and is able to reproduce very closely the retirement behavior of the American population. It reproduces the peaks in the distribution of Social Security applications at ages 62 and 65 and the observed facts that low earners and unhealthy individuals retire earlier. It also matches very closely the increase in retirement from 1950 to 2000. Changes in Social Security policy – which became much more generous – and the introduction of Medicare account for most of the expansion of retirement. In contrast, the isolated impact of the increase in longevity was a delaying of retirement.

Item Type: Article
Keywords: Behavioral and Social Science, Basic Behavioral and Social Science, Aging
Schools and Departments: University of Sussex Business School > Economics
SWORD Depositor: Mx Elements Account
Depositing User: Mx Elements Account
Date Deposited: 10 Oct 2022 12:54
Last Modified: 10 Oct 2022 12:54
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