Consequences of a boost of mandatory retirement age on long run income and PAYG pensions

Luciano Fanti

Discussion Papers from Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy

Abstract: In this paper we study the effects of a boost of the mandatory retirement age, which is largely advocated in most countries facing with both the decline in the labour force participation of elderly workers and the increasing population ageing. It is shown, in the basic two-period overlapping generations model of growth (Diamond, 1965), that the postponement of the retirement age may be harmful for long run income and when the capital's share is sufficiently high even PAYG pensions are reduced. In conclusion, since it is shown that the age of retirement might be reduced obtaining a higher income and even higher pension benefits, then our results suggest that the idea that a higher mandatory age of retirement is always beneficial in the long run for income and pension payments is theoretically controversial.

Keywords: Retirement age; Pensions; OLG model. (search for similar items in EconPapers)
JEL-codes: J26 O41 (search for similar items in EconPapers)
Date: 2012-09-01
New Economics Papers: this item is included in nep-age, nep-dem, nep-dge, nep-lab and nep-lma
Note: ISSN 2039-1854
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Persistent link: https://EconPapers.repec.org/RePEc:pie:dsedps:2012/149

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