Time-Inconsistent Preferences, Retirement, and Increasing Life Expectancy

Abstract EN

We study consumption behavior, retirement decisions, and endogenous growth within a dynamic equilibrium when individuals have present-biased preferences.

Compared to individual with exponential preferences, individual with hyperbolic preferences will choose to retire early for present-biased preferences but to delay retirement for the initial time preference rate.

We extend the benchmark equilibrium model to age-dependent survival law and solve numerically the equilibrium effects.

It shows that, at the same age, the consumption-capital ratio may have slightly positive effect on increasing life expectancy before retirement but has a significantly positive effect on it after retirement.