Education, lifetime labor supply, and longevity improvements

This paper presents an analysis of the differential role of mortality for the optimal schooling and retirement age when the accumulation of human capital follows the so-called “Ben–Porath mechanism”. We set up a life-cycle model of consumption and labor supply at the extensive margin that allows for...

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Bibliographic Details
Published in:Journal of economic dynamics & control 2016-12, Vol.73, p.118-141
Main Authors: Sánchez-Romero, Miguel, d׳Albis, Hippolyte, Prskawetz, Alexia
Format: Article
Language:English
Subjects:
Ben–Porath mechanism
Early retirement
Economics and Finance
Humanities and Social Sciences
Increasing length of schooling
Lifetime human wealth effect
Mortality decline
Years-to-consume effect
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Summary:This paper presents an analysis of the differential role of mortality for the optimal schooling and retirement age when the accumulation of human capital follows the so-called “Ben–Porath mechanism”. We set up a life-cycle model of consumption and labor supply at the extensive margin that allows for endogenous human capital formation. This paper makes two important contributions. First, we provide the conditions under which a decrease in mortality leads to a longer education period and an earlier retirement age. Second, those conditions are decomposed into a Ben–Porath mechanism and a lifetime-human wealth effect vs. the years-to-consume effect. Finally, using US and Swedish data for cohorts born between 1890 and 2000, we show that our model can match the empirical evidence.
ISSN:0165-1889
1879-1743
DOI:10.1016/j.jedc.2016.09.004