The Effects of Longevity and Distortions on Education and Retirement
Pedro Ferreira and
Samuel de Abreu Pessoa
Additional contact information
Samuel de Abreu Pessoa: Fundacao Getulio Vargas
Review of Economic Dynamics, 2007, vol. 10, issue 3, 472-493
Abstract:
This article studies the impact of longevity and taxation on life-cycle decisions and long run income. Individuals allocate optimally their total lifetime between education, working and retirement. They also decide at each moment how much to save or consume out of their income, and, after entering the labor market, how to divide their time between labor and leisure. The model incorporates experience-earnings profiles and return to education function that follows evidence from the labor literature. In this setup increases in longevity raises the investment in education - time in school - and retirement. The model is calibrated to the U.S. and is able to reproduce observed schooling trends of the last century. It also reproduces the increase in retirement, as the evidence shows. Simulations show that a country equal to the U.S. but with 20% smaller longevity will be 25% poorer, mostly because of the impact of life expectancy on human capital formation and retirement. In this economy labor taxes has a strong impact on the per capita income, as it decreases labor effort, time at school and retirement age, in addition to the general equilibrium impact over physical capital. (Copyright: Elsevier)
Keywords: Life expectancy; Human capital; Retirement; Long run income (search for similar items in EconPapers)
JEL-codes: I20 J20 O11 O41 (search for similar items in EconPapers)
Date: 2007
References: Add references at CitEc
Citations: View citations in EconPapers (18)
Downloads: (external link)
http://dx.doi.org/10.1016/j.red.2007.01.003
Access to full texts is restricted to ScienceDirect subscribers and institutional members. See http://www.sciencedirect.com/ for details.
Related works:
Working Paper: The effects of longevity and distortions on education and retirement (2005) 
Working Paper: The Effects of Longevity and Distortions on Education and Retirement (2005)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:red:issued:05-49
Ordering information: This journal article can be ordered from
https://www.economic ... ription-information/
DOI: 10.1016/j.red.2007.01.003
Access Statistics for this article
Review of Economic Dynamics is currently edited by Loukas Karabarbounis
More articles in Review of Economic Dynamics from Elsevier for the Society for Economic Dynamics Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().