Early Retirement and Social Security: A Long Term Perspective

J. Ignacio Conde-Ruiz (), Vincenzo Galasso () and Paola Profeta ()

No CESifo Working Paper No. 1571, CESifo Working Paper Series from CESifo Group Munich

Abstract: We provide a long-term perspective on the individual retirement behaviour and on the future of retirement. In a Markovian political economic theoretical framework, in which incentives to retire early are embedded, we derive a political equilibrium with positive social security contribution rates and early retirement. Aging has two opposite effects: it leads to lower taxes and fewer (early) retirees, while a poorer median voter will push for higher contributions. The model highlights the existence of crucial income effects: a decrease of the income of young people will induce them to postpone retirement and to vote for less social security.

Keywords: pensions; income effect; tax burden; politico-economic Markovian equilibrium (search for similar items in EconPapers)
JEL-codes: D72 H53 H55 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-pbe and nep-pub
Date: 2005
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Working Paper: Early Retirement and Social Security: A Long Term Perspective (2006)
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