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American Economic Review: Vol. 103 No. 4 (June 2013)

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Nonconvexities, Retirement, and the Elasticity of Labor Supply

Article Citation

Rogerson, Richard, and Johanna Wallenius. 2013. "Nonconvexities, Retirement, and the Elasticity of Labor Supply." American Economic Review, 103(4): 1445-62.

DOI: 10.1257/aer.103.4.1445

Abstract

We consider two life cycle models of labor supply that use nonconvexities to generate retirement. In each case we derive a link between hours worked prior to retirement, the intertemporal elasticity of substitution for labor (IES), and the size of the nonconvexities. This link is robust to allowing for credit constraints and human capital accumulation by younger workers and suggests values for the IES that are .75 or higher.

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Online Appendix (93.07 KB) | Download Data Set (113.83 KB)

Authors

Rogerson, Richard (Princeton U)
Wallenius, Johanna (Stockholm School of Economics)

JEL Classifications

D91: Intertemporal Consumer Choice; Life Cycle Models and Saving
J22: Time Allocation and Labor Supply
J24: Human Capital; Skills; Occupational Choice; Labor Productivity
J26: Retirement; Retirement Policies


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