TY  - JOUR
AU  - Kalemli-Ozcan,Sebnem
AU  - Weil,David N.
TI  - Mortality Change, the Uncertainty Effect, and Retirement
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 8742
PY  - 2002
Y2  - January 2002
UR  - http://www.nber.org/papers/w8742
L1  - http://www.nber.org/papers/w8742.pdf
N1  - Author contact info:
Sebnem Kalemli-Ozcan
Department of Economics
University of Maryland
Tydings Hall 4118D
College Park, MD 20742-7211
Tel: 301/405-3266
E-Mail: kalemli@econ.umd.edu

David N. Weil
Department of Economics
Box B
Brown University
Providence, RI 02912
Tel: 401/863-1754
Fax: 401/863-1970
E-Mail: david_weil@brown.edu
AB  - We examine the role of changing mortality in explaining the rise of retirement over the course of the 20th century. We construct a model in which individuals make labor/leisure choices over their lifetimes subject to uncertainty about their date of death. In an environment in which mortality is high, an individual who saved up for retirement would face a high risk of dying before he could enjoy his planned leisure. In this case, the optimal plan is for people to work until they die. As mortality falls, however, it becomes optimal to plan, and save for, retirement. We simulate our model using actual changes in the US life table over the last century, and show that this 'uncertainty effect' of declining mortality would have more than outweighed the 'horizon effect' by which rising life expectancy would have led to later retirement. One of our key results is that continuous changes in mortality can lead to discontinuous changes in retirement behavior.
ER  -