Hostname: page-component-586b7cd67f-t7czq Total loading time: 0 Render date: 2024-11-27T20:08:48.176Z Has data issue: false hasContentIssue false
  • English
  • Français

Mortality decline, productivity increase, and positive feedback between schooling and retirement choices

Published online by Cambridge University Press:  03 March 2021

Zhipeng Cai ,
Sau-Him Paul Lau Open the ORCID record for Sau-Him Paul Lau [Opens in a new window]  and
C. Y. Kelvin Yuen
Zhipeng Cai
Affiliation:
Equity Research, Institutional Securities, Morgan Stanley Asia Limited, Hong Kong
Sau-Him Paul Lau*
Affiliation:
Faculty of Business and Economics, University of Hong Kong, Hong Kong
C. Y. Kelvin Yuen
Affiliation:
Department of Economics, Washington University in St. Louis, One Brookings Drive, St. Louis, MO63130, USA
*
*Corresponding author. E-mail: [email protected]
Get access

Abstract

The twentieth century has seen a phenomenal decline in mortality and an increase in productivity level. These two important events likely affect people's choices of schooling years and retirement age. We first show that in a standard life-cycle model, positive feedback exists between optimal schooling years and retirement age choices. We then evaluate the impact of a mortality or productivity shock on an endogenous variable (schooling years or retirement age) by decomposing it into the direct and indirect effects, where the indirect effect arises from feedback from the other endogenous variable. Finally, we extend the model by including the utility benefit of schooling and show that a negative correlation of schooling years and retirement age is possible. Apart from clarifying the apparently similar concepts of positive co-movement and positive feedback, our results have implications relevant to the economic demography literature.

Keywords

Mortality declinepositive feedbackproductivity increaseretirement ageschooling yearsJ10J24J26
Type
Research Paper
Information
Journal of Demographic Economics , Volume 88 , Issue 1 , March 2022 , pp. 121 - 156
Copyright
Copyright © Université catholique de Louvain 2021

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Arthur, W. B. (1990) Positive feedbacks in the economy. Scientific American 262(2), 92–99.CrossRefGoogle Scholar
Ben-Porath, Y. (1967) The production of human capital and the life cycle of earnings. Journal of Political Economy 75, 352–365.CrossRefGoogle Scholar
Bils, M. and Klenow, P. J. (2000) Does schooling cause growth? American Economic Review 90, 1160–1183.CrossRefGoogle Scholar
Bloom, D. E., Canning, D., Mansfield, R. K. and Moore, M. (2007) Demographic change, social security systems, and savings. Journal of Monetary Economics 54, 92–114.CrossRefGoogle ScholarPubMed
Bloom, D. E., Canning, D. and Moore, M. (2014) Optimal retirement with increasing longevity. Scandinavian Journal of Economics 116, 838–858.CrossRefGoogle ScholarPubMed
Boucekkine, R., de la Croix, D. and Licandro, O. (2002) Vintage human capital, demographic trends and endogenous growth. Journal of Economic Theory 104, 340–375.CrossRefGoogle Scholar
Boucekkine, R., de la Croix, D. and Licandro, O. (2003) Early mortality declines at the dawn of modern growth. Scandinavian Journal of Economics 105, 401–418.CrossRefGoogle Scholar
Cai, Z. (2017) Essays on demographic changes and life-cycle behavior. PhD thesis, University of Hong Kong.Google Scholar
Cai, Z. and Lau, S.-H. P. (2017) Impact of mortality reductions on years of schooling and expected lifetime labor supply. Journal of Mathematical Economics 72, 134–144.CrossRefGoogle Scholar
Cervellati, M. and Sunde, U. (2013) Life expectancy, schooling, and lifetime labor supply: theory and evidence revisited. Econometrica 81, 2055–2086.Google Scholar
Chakraborty, S. (2004) Endogenous lifetime and economic growth. Journal of Economic Theory 116, 119–137.CrossRefGoogle Scholar
Costa, D. L. (1998) The Evolution of Retirement. Chicago: University of Chicago Press.CrossRefGoogle Scholar
D'Albis, H., Lau, S.-H. P. and Sánchez-Romero, M. (2012) Mortality transition and differential incentives for early retirement. Journal of Economic Theory 147, 261–283.CrossRefGoogle Scholar
Echevarria, C. A. and Iza, A. (2006) Life expectancy, human capital, social security and growth. Journal of Public Economics 90, 2323–2349.CrossRefGoogle Scholar
Flood, S., King, M., Rodgers, R, Ruggles, S and Warren, J. R. (2018) Integrated Public Use Microdata Series, Current Population Survey: Version 6.0 [dataset]. Minneapolis, MN: IPUMS. https://doi.org/10.18128/D030.V6.0.CrossRefGoogle Scholar
Fries, J. F. (1980) Aging, natural death, and the compression of morbidity. New England Journal of Medicine 303(3), 130–135.CrossRefGoogle ScholarPubMed
Goldin, C. and Katz, L. F. (2008) The Race Between Education and Technology. Cambridge, MA: Harvard University Press.Google Scholar
Gruber, J. and Wise, D. A. (1998) Social security and retirement: an international comparison. American Economic Review Papers and Proceedings 88(2), 158–163.Google Scholar
Gruber, J., and Wise, D. A. (1999) Introduction and summary. In Gruber, J. and Wise, D. A. (eds.), Social Security and Retirement around the World. Chicago: University of Chicago Press, pp. 1–35.Google Scholar
Hansen, C. W. and Lønstrup, L. (2012) Can higher life expectancy induce more schooling and earlier retirement? Journal of Population Economics 25, 1249–1264.CrossRefGoogle Scholar
Hazan, M. (2009) Longevity and lifetime labor supply: evidence and implications. Econometrica 77, 1829–1863.Google Scholar
Heijdra, B. J. and Romp, W. E. (2009) Human capital formation and macroeconomic performance in an ageing small open economy. Journal of Economic Dynamics and Control 33, 725–744.CrossRefGoogle Scholar
Kalemli-Ozcan, S. and Weil, D. (2010) Mortality change, the uncertainty effect, and retirement. Journal of Economic Growth 15, 65–91.CrossRefGoogle ScholarPubMed
Maestas, N. and Zissimopoulos, J. (2010) How longer work lives ease the crunch of population aging. Journal of Economic Perspectives 24(1), 139–160.CrossRefGoogle ScholarPubMed
Manuelli, R. E., Seshadri, A. and Shin, Y. (2012) Lifetime labor supply and human capital investment. Working paper, Washington University St. Louis.CrossRefGoogle Scholar
Restuccia, D. and Vandenbroucke, G. (2013) A century of human capital and hours. Economic Inquiry 51, 1849–1866.CrossRefGoogle Scholar
Sánchez-Romero, M., d'Albis, H. and Prskawetz, A. (2016) Education, lifetime labor supply, and longevity improvements. Journal of Economic Dynamics and Control 73, 118–141.CrossRefGoogle Scholar
Sheshinski, E. (2009) Uncertain longevity and investment in education. Working Paper No. 2784, CESifo.CrossRefGoogle Scholar
Vietorisz, T. and Harrison, B. (1973) Labor market segmentation: positive feedback and divergent development. American Economic Review 63(2), 366–376.Google Scholar
Yaari, M. E. (1965) Uncertain lifetime, life insurance, and the theory of the consumer. Review of Economic Studies 32, 137–150.CrossRefGoogle Scholar
Supplementary material: PDF

Cai et al. supplementary material

Appendix

Download Cai et al. supplementary material(PDF)
PDF 311 KB