Fürnkranz-Prskawetz, Alexia Sanchez-Romero, Miguel d'Albis, Hippolyte
Year of Publication:
Beiträge zur Jahrestagung des Vereins für Socialpolitik 2015: Ökonomische Entwicklung - Theorie und Politik - Session: Labor Supply B18-V1
This paper presents an analysis of the differential role of mortality for the optimal schooling and retirement age when the accumulation of human capital follows the so-called "Ben-Porath mechanism". We set up a life-cycle model of consumption and labor supply at the extensive margin that allows for endogenous human capital formation based on Card (2001). This paper makes two important contributions. First, we provide the conditions under which a decrease in mortality leads to a longer education period and an earlier retirement age. Second, those conditions are decomposed into a Ben-Porath mechanism and a lifetimehuman wealth effect vs. the years-to-consume effect. Finally, using Swedish data for cohorts born between 1865 and 2000, we show that our model can match the empirical evidence.