Mortality transition and differential incentives for early retirement

Journal article: Many studies specify human mortality patterns parametrically, with a parameter change affecting mortality rates at different ages simultaneously. Motivated by the stylized fact that a mortality decline affects primarily younger people in the early phase of mortality transition but mainly older people in the later phase, we study how a mortality change at an arbitrary age affects optimal retirement age. Using the Volterra derivative for a functional, we show that mortality reductions at older ages delay retirement unambiguously, but that mortality reductions at younger ages may lead to earlier retirement due to a substantial increase in the individual's expected lifetime human wealth.

Author(s)

Hippolyte d’Albis, Paul Lau Sau-Him, Miguel Sanchez-Romero

Journal
  • Journal of Economic Theory
Date of publication
  • 2012
Keywords JEL
D91 J11 J26
Keywords
  • Mortality decline
  • Incentive for early retirement
  • Years-to-consume effect
  • Lifetime human wealth effect
Pages
  • 261-283
Version
  • 1
Volume
  • 147