A One-Sector Neoclassical Growth Model with Endogenous Retirement

Kiminori Matsuyama

No CIRJE-F-531, CIRJE F-Series from CIRJE, Faculty of Economics, University of Tokyo

Abstract: This paper extends Diamond's OG model by allowing the agents to make the retirement decision. Earning a higher wage income when young not only enables the agents to save more. It also induces more agents to retire early and gives an additional incentive to save more for retirement. This leads to a higher capitallabor ratio in the following period, and hence the next generation of agents earns a higher wage income when young. Due to this positive feedback mechanism, endogenous retirement magnifies the persistence of growth dynamics and even generates multiple steady states for empirically plausible parameter values.

Pages: 26 pages
Date: 2007-12
New Economics Papers: this item is included in nep-dge
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Related works:
Journal Article: A ONE‐SECTOR NEOCLASSICAL GROWTH MODEL WITH ENDOGENOUS RETIREMENT (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:tky:fseres:2007cf531

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