“Mortality transition and differential incentives for early retirement” by Paul LAU
Toulouse School of Economics (LERNA), France
University of Hong Kong
University of California
Existing studies investigating the effect of mortality decline on retirement age usually specify the human mortality pattern in a parametric way and consider the derivative of optimal retirement age with respect to a change in the survival parameter. However, a survival parameter change usually affects the mortality rates for different ages simultaneously. Motivated by the stylized fact that mortality decline affects primarily younger people in the early phase of a mortality transition but mainly older people in the later phase, we study the more fundamental question of how a mortality change at an arbitrary age affects optimal retirement age. By using the Volterra derivative for a functional, we show that, while a mortality decline at an older age unambiguously leads to a later retirement age, a mortality decline at a younger age may lead to earlier retirement because of the substantial increase in the individual's expected lifetime human wealth.