Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/221593 
Year of Publication: 
1998
Series/Report no.: 
Discussion Paper No. 1237
Publisher: 
Northwestern University, Kellogg School of Management, Center for Mathematical Studies in Economics and Management Science, Evanston, IL
Abstract: 
This paper endogenizes the elderly's labor force participation in an overlapping generations economy under the assumption that retirement is a luxury. In a developed economy, the agents earn a high wage income when young and retire when old. This reduces the labor supply (through a low participation rate of the elderly), and stimulates capital accumulation (through saving for retirement). The resulting high capital-labor ration leads to a higher wage income for the next generation. In a poor economy, the agents continue to work when old and saves little, which implies a low capital-labor ration and a low wage income for the next generation. Due to such a positive feedback mechanism, the endogeneity of retirement magnifies the persistence of growth dynamics, thereby slowing down a convergence to the steady state, and evene generating multiple steady states for empirically plausible parameter values.
Subjects: 
Economic Development and Labor force participation rate of the elderly
Labor Supply Effects of Retirement
Saving Effects of Retirement
Persistence in Capital Accumulation
Magnification Effect
Multiple Steady States
JEL: 
O11
Document Type: 
Working Paper

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