() and Sören Blomquist
Thomas Aronsson: Department of Economics, Umeå University, Postal: Department of Economics, Umeå University, S 901 87 Umeå, Sweden
Sören Blomquist: Department of Economics, Uppsala University, Postal: Department of Economics, Uppsala University, E 751 20 Uppsala, Sweden
Abstract: In this paper, we consider how the hours of work and retirement age ought to respond to a change in the uncertainty of the length of life. In a first best framework, where a benevolent government exercises perfect control over the individuals’ labor supply and retirement-decisions, the results show that a decrease in the standard deviation of life-length leads to an increase in the optimal retirement age and a decrease in the hours of work per period spent working. This result is robust, and is also derived in models of decentralized decision-making where individuals decide on their own consumption, labor supply, and retirement age, and where the government attempts to affect their behavior and welfare through redistribution and pension policy.
18 pages, March 2, 2018
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