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A note on “raising the mandatory retirement age and its effect on long‐run income and Pay As You Go (PAYG) pensions”
Author(s) -
Tanaka Jumpei
Publication year - 2019
Publication title -
metroeconomica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.256
H-Index - 29
eISSN - 1467-999X
pISSN - 0026-1386
DOI - 10.1111/meca.12227
Subject(s) - economics , imperfect , elasticity of substitution , pension , labour economics , raising (metalworking) , elasticity (physics) , substitution (logic) , overlapping generations model , capital (architecture) , microeconomics , finance , production (economics) , mathematics , computer science , programming language , composite material , history , philosophy , linguistics , materials science , geometry , archaeology
Fanti (2014, Metroeconomica , 65, 619–645) showed that raising the mandatory retirement age always reduces capital accumulation and may lower per young income and pension benefit, under the assumption that old labor and young labor are perfect substitutes (or equivalently, the elasticity of substitution is infinite). We reexamine his analysis by assuming that the two labors are imperfect substitutes (the elasticity of substitution is finite), and prove that his results no longer hold when the elasticity of substitution is not sufficiently high.