Mortality decline, productivity increase, and positive feedback between schooling and retirement choices. (3rd March 2022)

• Record Type: Journal Article
• Authors: Cai, Zhipeng; Lau, Sau-Him Paul; Yuen, C. Y. Kelvin
• Is Part Of: Journal of demographic economics. Volume 88:Number 1(2022)
• Page Start: 121
• Page End: 156
• Publication Date: 2022-03-03
• Subjects: Mortality decline -- positive feedback -- productivity increase -- retirement age -- schooling years; J10 -- J24 -- J26; Demography -- Economic aspects -- Periodicals; Population -- Economic aspects -- Periodicals; 304.605
• DOI: 10.1017/dem.2020.33
• Languages: English
• ISSNs: 2054-0892

Abstract

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.