Quasi-hyperbolic discounting and retirement |
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| Institution: | 1. Department of Economics, MIT, Cambridge, MA 02139, USA;2. Department of Economics, University of California, Berkeley, CA 94720 USA;1. Department of Economics, Vrije Universiteit Amsterdam, De Boelelaan 1105, 1081HV Amsterdam, The Netherlands;2. Amsterdam Institute for International Development, Pietersbergweg 17, 1105BM Amsterdam, The Netherlands;3. Tinbergen Institute, Gustav Mahlerlaan 117, 1082MS Amsterdam, The Netherlands;4. Markets, Trade and Institutions Division, International Food Policy Research Institute, 2033 K Street, Washington, DC, NW 20006, USA;5. CPB Netherlands Bureau for Economic Policy Analysis, Bezuidenhoutseweg 30, 2594AV The Hague, The Netherlands;1. Department of Economics, University of California, Berkeley, 530 Evans Hall #3880, Berkeley, CA 94720-3880, United States of America;2. Yale University, Department of Economics, 30 Hillhouse Ave, New Haven, CT 06510, United States of America;3. Duke University, Department of Economics, 213 Social Sciences/Box 90097, Durham, NC 27708, United States of America |
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| Abstract: | Some people have self-control problems regularly. This paper adds endogenous retirement to Laibson’s quasi-hyperbolic discounting savings model Quarterly Journal of Economics 112 (1997) 443–477]. Earlier selves think that the deciding self tends to retire too early and may save less to induce later retirement. Still earlier selves may think the pre-retirement self does this too much, saving more to induce early retirement. The consumption pattern may be different from that with exponential discounting. Other observational non-equivalence includes the impact of changing mandatory retirement rules or work incentives on savings and a possibly negative marginal propensity to consume out of increased future earnings. Naive agents are briefly considered. |
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