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Mortality Decline, Retirement Age, And Aggregate Savings

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  • Chen, Yanyou
  • Lau, Sau-Him Paul

Abstract

We use an overlapping-generations model with endogenous retirement and saving to study the trade-off between saving and retirement age in response to mortality decline. When life expectancy increases by one year, people delay retirement by about four months. With this magnitude of delay in retirement age, the percentage of lifetime spent in working decreases, and people have to save more for postretirement years. Neither the pure form of sole adjustment through savings nor the proportionality hypothesis is consistent with our results, but the proportionality hypothesis is a better rule of thumb in predicting future behavior. Our choice of the modified Boucekkine et al. (2002) survival function gives a convenient one-to-one correspondence between life expectancy increase and a change in the survival parameter.

Suggested Citation

  • Chen, Yanyou & Lau, Sau-Him Paul, 2016. "Mortality Decline, Retirement Age, And Aggregate Savings," Macroeconomic Dynamics, Cambridge University Press, vol. 20(3), pages 715-736, April.
    • Handle: RePEc:cup:macdyn:v:20:y:2016:i:03:p:715-736_00
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    Cited by:

    1. Wei Gao & Chengliang Yan & Fuyang Zhao, 2021. "Longevity, Grandparents Caring, and PAYG Pensions," Annals of Economics and Finance, Society for AEF, vol. 22(2), pages 451-465, November.
    2. Mercedes Gumbau Albert, 2021. "The impact of health status and human capital formation on regional performance: Empirical evidence," Papers in Regional Science, Wiley Blackwell, vol. 100(1), pages 123-139, February.
    3. Jaimes, Richard & Westerhout, Ed, 2023. "Optimal policies in an ageing society," The Journal of the Economics of Ageing, Elsevier, vol. 26(C).
    4. Bloom, David E. & Kuhn, Michael & Prettner, Klaus, 2018. "Health and Economic Growth," IZA Discussion Papers 11939, Institute of Labor Economics (IZA).
    5. Cai, Zhipeng & Lau, Sau-Him Paul, 2017. "Impact of mortality reductions on years of schooling and expected lifetime labor supply," Journal of Mathematical Economics, Elsevier, vol. 72(C), pages 134-144.
    6. Cipriani, Giam Pietro & Fioroni, Tamara, 2021. "Endogenous Demographic Change, Retirement, And Social Security," Macroeconomic Dynamics, Cambridge University Press, vol. 25(3), pages 609-631, April.

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