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Retirement date effects on saving behavior: Endogenous labor supply and non‐separable preferences
Author(s) -
Romm Aylit Tina
Publication year - 2017
Publication title -
international journal of economic theory
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.351
H-Index - 11
eISSN - 1742-7363
pISSN - 1742-7355
DOI - 10.1111/ijet.12132
Subject(s) - economics , consumption (sociology) , derivative (finance) , margin (machine learning) , labour economics , separable space , function (biology) , labour supply , microeconomics , financial economics , mathematics , mathematical analysis , social science , machine learning , evolutionary biology , sociology , computer science , biology
This paper analyzes the effect of changing retirement dates on pre‐retirement saving, looking at the effect of a negative cross derivative of the utility function with respect to consumption and leisure. This effect is analyzed in the contexts of both exogenous and endogenous labor supply before retirement. In the case of exogenous labor supply, the relative decrease in saving in response to an increase in the expected retirement age is larger in the case of a negative cross derivative of the utility function (non‐separable preferences) than in the case of a zero cross derivative (separable preferences). However, in the case where labor supply before retirement decreases at the intensive margin in response to an increase in the retirement age, the relative decrease in saving in response to an increase in the expected retirement age is smaller in the case of a negative cross derivative than in the case of a zero cross derivative.