50 is the New 30 - Long-Run Trends of Schooling and Retirement Explained by Human Aging
Center for European, Governance and Economic Development Research Discussion Paper No. 152
34 Pages Posted: 3 Apr 2013
Date Written: April 2, 2013
Abstract
Workers in the US and other developed countries retire no later than a century ago and spend a significantly longer part of their life in school, implying that they stay less years in the work force. The facts of longer schooling and simultaneously shorter working life are seemingly hard to square with the rationality of the standard economic life cycle model. In this paper we propose a novel theory, based on health and aging, that explains these long-run trends. Workers optimally respond to a longer stay in a healthy state of high productivity by obtaining more education and supplying less labor. Better health increases productivity and amplifies the return on education. The health accelerator allows workers to finance educational efforts with less forgone labor supply than in the previous state of shorter healthy life expectancy. When both life-span and healthy life expectancy increase, the health effect is dominating and the working life gets shorter if the preference for leisure is sufficiently strong or the return on education is sufficiently large. We calibrate an extended version of the model and show that it is capable to predict the historical trends of schooling and retirement.
Keywords: healthy life expectancy, longevity, education, retirement, labor supply, compression of morbidity
JEL Classification: E20, I25, J22, O10, O40
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Population, Technology, and Growth: From the Malthusian Regime to the Demographic Transition
By Oded Galor and David N. Weil
-
By Oded Galor and David N. Weil
-
The Gender Gap, Fertility and Growth
By Oded Galor and David N. Weil
-
The Gender Gap, Fertility, and Growth
By Oded Galor and David N. Weil
-
By Gary D. Hansen and Edward C. Prescott
-
Natural Selection and the Origin of Economic Growth
By Oded Galor and Omer Moav
-
Natural Selection and the Origin of Economic Growth
By Oded Galor and Omer Moav
-
From Stagnation to Growth: Unified Growth Theory
By Oded Galor
-
From Stagnation to Growth: Unified Growth Theory
By Oded Galor
-
From Physical to Human Capital Accumulation: Inequality in the Process of Development
By Oded Galor and Omer Moav