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LONGEVITY, RETIREMENT, AND CAPITAL ACCUMULATION IN A RECURSIVE MODEL WITH AN APPLICATION TO MANDATORY RETIREMENT

Published online by Cambridge University Press:  01 June 2009

Jie Zhang  and
Junsen Zhang
Jie Zhang*
Affiliation:
National University of Singapore and University of Queensland
Junsen Zhang
Affiliation:
National University of Singapore and University of Queensland
*
Address correspondence to: Jie Zhang, School of Economics, University of Queensland, Brisbane, Qld 4072, Australia; e-mail: j.zhang@uq.edu.au.
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Abstract

This paper explores how retirement timing, together with life-cycle saving and human capital investment in children, responds to rising longevity in a recursive model with altruistic agents. We find that rising longevity raises the retirement age. If initial life expectancy is not too high, rising longevity also raises human capital investment in children and the saving rate. Through these channels, rising longevity can be conducive to long-run economic growth. A binding mandatory retirement age reduces human capital investment and the growth rate, raises the saving rate, and reduces welfare.

Keywords

LongevityGrowthLife-Cycle SavingRetirement
Type
Articles
Information
Macroeconomic Dynamics , Volume 13 , Issue 3 , June 2009 , pp. 327 - 348
Copyright
Copyright © Cambridge University Press 2009

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