Quotation Prettner, Klaus, Canning, David. 2014. Increasing life expectancy and optimal retirement in general equilibrium. Economic Theory. 56 191-217.




We analytically assess the effects of changes in longevity on the interest rate, the consumption-savings behavior, and the optimal retirement decision within a dynamic general equilibrium setting. We derive a simple sufficient condition for which the optimal retirement age always increases with life expectancy. Numerical assessment reveals that for realistic parameter values that reflect the situation in industrialized countries, the optimal retirement age indeed increases with life expectancy and the sufficient condition tends to be fulfilled. Together with the fact that the actual retirement age did not increase in industrialized countries over the last decades, while there have been large improvements in longevity, this leads us to conclude that strong monetary and institutional incentives for early retirement exist and these counteract the effects of increasing life expectancy. Our policy conclusion is that the retirement age should be partially linked to life expectancy and that incentives for early retirement should be removed.


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Publication's profile

Status of publication Published
Affiliation External
Type of publication Journal article
Journal Economic Theory
Citation Index SSCI
WU Journalrating 2009 A
WU-Journal-Rating new FIN-A, VW-B, WH-B
Language English
Title Increasing life expectancy and optimal retirement in general equilibrium
Volume 56
Year 2014
Page from 191
Page to 217
Reviewed? Y
URL https://link.springer.com/article/10.1007/s00199-013-0776-9
DOI https://doi.org/10.1007/s00199-013-0776-9
Open Access N


Prettner, Klaus (Details)
Canning, David (Harvard T.H. Chan School of Public Health, United States/USA)
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