an evaluation of the life cycle effects of minimum pensions on retirement behavior in this paper we explore the effects of the minimum pension program on welfare and retirement in spain this is done with a stylized life cycle model which provides a convenient analytical characterization of optimal behavior we use data from the spanish social security to estimate the behavioral parameters of the model and then simulate the changes induced by the minimum pension in aggregate retirement patterns the impact is substantial there is a threefold increase in retirement at 60 the age of first entitlement with respect to the economy without minimum pensions and total early retirement before or at 60 is almost 50 larger copyright 2007 john wiley sons ltd

the effect of pension plan type on retirement age distinguishing plan incentives from career length preferences the widespread movement from dened benet db plans to dened contribution dc plans over the past few decades has transferred much of the retirement savings risk from the institution to the individual particularly in the private sector this study uses the retirement condence

vertical specialization in a ricardian model with a continuum of stages of production the traditional models of the pure theory of international trade have mainly discussed specialization in final goods that is the entire vertical processing of a good is done in the country that specializes in that good thus if a country specializes in the production of clothing the raw materials needed for the production of clothing are also produced in that country vertical specialization 1 on the other hand means that the countries specialize along the vertical productive spectrum of a good one country may produce yarn and export it while the other country may produce clothing with imported yarn the traded goods under vertical specialization are final goods as well as raw materials a good typically has many stages along its vertical spectrum and a country can specialize at any one of those stages the question that immediately arises is what determines the particular stage at which the vertical spectrum is broken so that each country can specialize in one part to put it differently if a country is seen to be specializing in the production of yarn there must be some reason why it does not specialize in raw cotton the purpose of this paper is to answer that question in section i a very simple model is described with two countries and one final good and it is shown how the stage of specialization can be determined as an endogenous variable section ii discusses the price system and the gains from trade while section iii briefly discusses how the model can be extended to incorporate two final goods

an empirical model of labor supply in a life cycle setting this paper formulates and estimates a structural intertemporal model of labor supply using theoretical characterizations derived from an economic model of lifetime behavior a two step empirical analysis yields estimates of intertemporal and uncompensated substitution effects which provide the information needed to predict the response of hours of work to life cycle wage growth and shifts in the lifetime wage path

a model of trade in intermediate goods abstract the purpose of this paper is to show in a two country two good stationary state model where one of the goods is produced by an austrian flow input point output technology that the country with the higher rate of interest specializes in the early stages of production these countries can be roughly identified with the less developed nations where lower wage rates and higher capital costs lead to a comparative advantage in the early stages of the productive spectrum

income tax policy and lifetime labor supply abstract a progressive income tax structure provides incentives for individuals to alter their rate of work and their age of retirement compared to a zero tax or proportional tax equilibrium progressive taxation induces individuals to take less leisure in the form of retirement in exchange for more leisure during the worklife especially at high wage levels the imposition of a special pension tax provision on top of a progressive tax structure offsets the distortion on leisure alternatives imposed by progressivity indeed the pension tax deferral provision can neutralize the impact of tax progressivity on the work profile over life the magnitude of these tax inducements in the u s tax structure are non trivial and therefore are expected to alter labor supply decisions over the lifetime the model finds empirical support using data from the social security newly entitled beneficiaries survey

health insurance and retirement of married couples summary most health insurance in the usa is provided by employers until eligibility for public health insurance medicare begins at age 65 retiring before 65 exposes workers who lack retiree health insurance coverage to the risk of catastrophic medical expenditure we solve and estimate a dynamic model of the employment behavior of older married couples that includes risky medical expenditure and health insurance parameter estimates imply that the risk reducing feature of health insurance can account for about half of the observed association between retiree health insurance and employment for married men but can account for only one tenth of the much larger observed association for married women policy simulations imply very small effects on employment of changing the age of eligibility for medicare from 65 to 67 copyright 2006 john wiley sons ltd

do changes in pension incentives affect retirement a longitudinal study of subjective retirement expectations this paper investigates the responsiveness of individuals retirement decisions to forward looking measures of pension accumulations in contrast to previous research we use within person variation in retirement incentives and are able to control for unobserved heterogeneity in tastes for retirement by studying a panel of subjective retirement expectations we confirm that individuals do respond as expected to pension incentives even when we control for individual fixed effects however the magnitude of these responses differs when estimated from models based on within person versus cross sectional variation the inclusion of fixed effects reduces the response by about half

trade and protection with multistage production this paper analyses trade in manuf acutured goods that are produced via a vertical production structure with many stages where some value is added at each to an intermediate product to yield a good in process ready for the next stage we consider the stage at which a good is traded to be an economically endogenous variable with comparative advantage determining the pattern of production specialization by stages across countries we study how endowment changes and policy shifts move the margin of comparative advantage which thus provides a channel for resource allocation adjustment that is additional to the usual ones of factor substitution and changes in the quantity of output

a life cycle model of health and retirement the case of swedish pension reform abstract sweden is one of the few western economies to have undertaken a large pension reform in recent years this was done with great expectations but little formal analysis in this paper we develop a life cycle labor supply model to quantify the predicted labor supply implications of this reform in our framework individuals choose when to stop working and given eligibility criteria when if to apply for disability and pension benefits agents are heterogeneous in skills and receive exogenous shocks to health throughout their life we find that the new pension system creates large incentives for the continued employment of older workers this is promising news for countries grappling with pension reform and indicates that there are significant lessons to be learned from the swedish case

saving and investing for early retirement a theoretical analysis we study optimal consumption and portfolio choice in a framework where investors adjust their labor supply through an irreversible choice of their retirement time we show that investing for early retirement tends to increase savings and reduce an agent s effective relative risk aversion thus increasing her stock market exposure contrary to common intuition an investor might find it optimal to increase the proportion of financial wealth held in stocks as she ages and accumulates assets even when her income and the investment opportunity set are constant the model predicts a decrease in risk aversion following strong market gains like those observed in the nineties

venture capital financing moral hazard and learning we consider the provision of venture capital in a dynamic agency model the value of the venture project is initially uncertain and more information arrives by developing the project the allocation of the funds and the learning process are subject to moral hazard the optimal contract is a time varying share contract which provides intertemporal risk sharing between venture capitalist and entrepreneur the share of the entrepreneur reflects the value of a real option the option itself is based on the control of the funds the dynamic agency costs may be high and lead to an inefficient early stopping of the project a positive liquidation value explains the adoption of strip financing or convertible securities finally relationship financing including monitoring and the occasional replacement of the management improves the efficiency of the financial contracting

social security liquidity and early retirement abstract this paper investigates the effect of social security on retirement decisions it argues that it is important to take realistic account of how recipients evaluate potential benefit flows the paper presents a simple retirement model in which liquidity constraints prompt individuals to use higher than market discount rates in evaluating future pension benefits as a consequence even an apparently actuarially fair early retirement benefit could on average discourage continued work using data on individual retirement decisions i find support for the argument that this phenomenon contributes to some of the observed increase in early retirement

intertemporal substitution in labor supply evidence from micro data the sensitivity of the supply of labor to intertemporal variation in the wage is an important issue in macroeconomics the analysis of social security and pensions and the study of life cycle patterns of work this paper explores two approaches to the measurement of intertemporal substitution that have appeared in the literature the first approach is to use consumption to control for wealth and unobserved expectations about future wages in the labor supply equation the second approach is to estimate a first difference equation for hours in which labor supply from the previous period serves as a control for wealth and wage expectations the results indicate that intertemporal substitution elasticity for married men is positive but small

factor movements and commodity trade as complements abstract several models are presented in which factor mobility leads to an increase in the volume of world trade the models share the common characteristic that the basis for trade is something other than differences in relative factor endowments these alternative bases for trade include returns to scale imperfect competition production and factor taxes and differences in production technology taken together the models suggest a more general idea the widely held notion that trade in goods and factors are substitutes is in fact a rather special result which is a general characteristic only of factor proportions models

transport costs in a ricardian model with multistage production a significant share of international trade is generated by a mismatch of factors of production and technologies with markets international trade in final goods is one way of overcoming this geographical mismatch as pointed out by mundell 15 magee 13 and others this mismatching could also be overcome by a movement of factors and or technologies across international boundaries 2 when the production of a good consists of a series of production stages it is conceivable that trade of the good at any one of those stages could remedy the mismatching problem the stage at which the good or intermediate good will be traded will depend on a series of factors such as the costs of transportation tariffs or other trade restrictions levied on the good at different stages of production etc 3 this paper focuses on transport costs as a determinant of the stage at which a good is traded the quantitative importance of transport costs in international trade has been documented by various authors 9 10 4 it is generally believed that for international trade as a whole transport costs average around 10 of the value of the good 5 the theoretical treatment of international transport costs has concentrated on trade in final goods the standard result mentioned in textbooks is that transport costs close the gap between autarkic prices with the possibility of goods dropping out of international trade when transport costs are sufficiently high so as to close the gap entirely the explicit incorporation of a resourceusing transport sector into the standard two factor two good model 2 7 11 revealed that the

economic determinants of workers retirement decisions economic determinants of workers retirement decisions the landscape for older workers has changed dramatically in recent decades governments have made cuts to public pension programs private pensions have shifted from defined benefit to defined contribution plans equity and housing markets have been unusually volatile and workers have experienced declining morbidity and mortality at the same time the labor force participation rate for older men and women has been rising over the past two decades implying later retirement are these phenomena related this paper reviews the large and growing body of literature exploring the economic determinants of workers retirement decisions including public and private pensions wealth and savings health and health insurance and labor demand

the effects of health wealth and wages on labour supply and retirement behaviour this paper estimates a life cycle model of labour supply retirement and savings behaviour in which future health status and wages are uncertain individuals face a fixed cost of work and cannot borrow against future labour pension or social security income the method of simulated moments is used to match the life cycle profiles of labour force participation hours worked and assets that are estimated from the data to those that are generated by the model the model establishes that the tax structure of the social security system and pensions are key determinants of the high observed job exit rates at ages 62 and 65 removing the tax wedge embedded in the social security earnings test for individuals aged 65 and older would delay job exit by almost one year by contrast social security benefit levels health and borrowing constraints are less important determinants of job exit at older ages for example reducing social security benefits by 20 would cause workers to delay exit from the labour force by only three months

consumption retirement and social security evaluating the efficiency of reform that encourages longer careers abstract this paper proposes and analyzes a social security reform in which individuals no longer face the oasi payroll tax after say age 54 or a career of 34 years and their subsequent earnings have no bearing on their benefits we first estimate parameters of a life cycle model our specification includes non separable preferences and possible disability it predicts a consumption expenditure change at retirement we use the magnitude of the expenditure change together with households retirement age decisions to identify key structural parameters the estimated magnitude of the change in consumption expenditure depends importantly on the treatment of consumption by adult children of the household simulations indicate that the reform could increase retirement ages one year or more equivalent variations could average more than 4000 per household and income tax revenues per household could increase by more than 14 000

a structural retirement model the life cycle model analyzed here constrains most work on the main job to be full time partial retirement entails a wage reduction and frequently a job change maximum likelihood estimates of utility function parameters are designed to incorporate information on the age of leaving full time work and the age of full retirement the model closely tracks retirement behavior including peaks in retirement activity at 62 and 65 the paper explores the relation of these peaks to nonlinearities in the budget constraint created by various retirement programs policy analyses based on this and on earlier models with simpler structures are compared the retirement choice is one of the more prominent manifestations of life cycle behavior the decision is the result of an interplay between an individual s preferences and a set of incentives which change in complicated ways as the individual progresses through his or her late 50 s and 60 s the purpose of this study is to formulate and estimate a structural model which incorporates in a fundamental way this interplay between lifetime preferences and incentives and to illustrate how such a model may be used to investigate retirement behavior a structural model of this type is essential for analyzing potential policy changes which can be expected to affect incentives in varying ways over a number of years in the life cycle the current study incorporates two structural features which have frequently been omitted from previous studies first the model requires that an individual who wishes to reduce work effort below full time must accept a reduced hourly wage rate in order to do so this reflects empirical evidence from micro data sets which indicates that around one third of older individuals engage in part time work at one time or another and that regardless of whether or not these older workers change jobs to obtain part time work they usually take wage cuts as compared to their previous full time work 2 the fact that an individual is willing to accept a lower wage rate in return for the opportunity to work fewer than full time hours contains important information about the preferences of the

are international trade and factor mobility substitutes abstract this paper analyzes whether factor flows and commodity trade are substitutes or complements i e whether increasing the level of one impacts adversely or favorably on the volume of the other it derives with the aid of a new general equilibrium framework of the world which allows possible differences in factor endowments tastes and technologies across the two trading countries the necessary and sufficient condition for substitutability and complementarity the results are then further examined in two special cases a survey of different concepts of substitutability and complementarity which have appeared in the literature is also given

how social security and medicare affect retirement behavior in a world of incomplete markets this paper provides an empirical analysis of how the u s social security and medicare insurance system affect the labor supply of older males in the presence of incomplete markets for loans annuities and health insurance we estimate a detailed dynamic programming dp model of the joint labor supply and social security acceptance decision focusing on a sample of males in the low to middle income brackets whose only pension is social security the dp model delivers a rich set of predictions about the dynamics of retirement behavior and comparisons of actual vs predicted behavior show that the dp model is able to account for wide variety of phenomena observed in the data including the pronounced peaks in the distribution of retirement ages at 62 and 65 the ages of early and normal eligibility for social security benefits respectively we identify a significant fraction of health insurance constrained individuals who have no form of retiree health insurance other than medicare and who can only obtain fairly priced private health insurance via their employer s group health plan the combination of significant individual risk aversion and a long tailed pareto distribution of health care expenditures implies that there is a significant security value for these individuals to remain employed until they are eligible for medicare coverage at age 65 overall our model suggests that a number of heretofore puzzling aspects of retirement behavior can be viewed as artifacts of particular details of the social security rules whose incentive effects are especially strong for lower income individuals and those who do not have access to fairly priced loans annuities and health insurance