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Mortality decline, Productivity Increase, and Positive Feedback Between Schooling and Retirement Choices

Author

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  • Zhipeng CAI

    (Equity Research, Institutional Securities, Morgan Stanley Asia Limited)

  • Sau-Him PAUL

    (Faculty of Business and Economics, University of Hong Kong)

  • C.Y. KELVIN YUEN

    (Department of Economics, Washington University)

Abstract

The twentieth century has seen a phenomenal decline in mortality and an increase in productivity level. These two important events likely affect people's choices of schooling years and retirement age. We first show that in a standard life-cycle model, positive feedback exists between optimal schooling years and retirement age choices. We then evaluate the impact of a mortality or productivity shock on an endogenous variable (schooling years or retirement age) by decomposing it into the direct and indirect effects, where the indirect effect arises from feedback from the other endogenous variable. Finally, we extend the model by including the utility benefit of schooling and show that a negative correlation of schooling years and retirement age is possible. Apart from clarifying the apparently similar concepts of positive co-movement and positive feedback, our results have implications relevant to the economic demography literature.

Suggested Citation

  • Zhipeng CAI & Sau-Him PAUL & C.Y. KELVIN YUEN, 2022. "Mortality decline, Productivity Increase, and Positive Feedback Between Schooling and Retirement Choices," JODE - Journal of Demographic Economics, Cambridge University Press, vol. 88(1), pages 121-156, March.
    • Handle: RePEc:ctl:louvde:v:88:y:2022:i:1:p:121-156
    DOI: 10.1017/dem.2020.33
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    Keywords

    Mortality decline; Positive Feedback; Productivity increase; Retirement age; Schooling years;
    All these keywords.

    JEL classification:

    • J10 - Labor and Demographic Economics - - Demographic Economics - - - General
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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