The optimal legal retirement age in an OLG model with endogenous labour supply

Casper Hansen and Lars Lønstrup ()
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Lars Lønstrup: Department of Business and Economics, Postal: University of Southern Denmark, Campusvej 55, DK-5230 Odense M, Denmark

No 5/2009, Discussion Papers on Economics from University of Southern Denmark, Department of Economics

Abstract: The long run welfare implications of the legal retirement age are studied in a perfect foresight overlapping-generations model where agents live for two periods. Agents’ lifetime is divided between working life and retirement by a legal retirement age controlled by the government whereas agents, besides savings, control the intensive margin or "yearly" labour supply. The legal retirement age is utilized to dampen distortionary effects of payroll taxes and public pension annuities and promote capital accumulation. We show that a social optimal legal retirement age exists and how it depends on whether payroll taxes or benefit annuities ensures budget balance of the PAYG pension system.

Keywords: Optimal legal retirement age; pay-as-you-go-pension systems; overlapping-generations model (search for similar items in EconPapers)
JEL-codes: E61 H55 J26 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2009-07-01
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:hhs:sdueko:2009_005

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