Pension, Retirement, and Growth in the Presence Heterogeneous Elderly

Abstract

This study explores the linkage between the labor force participation of the elderly and the long-run performance of the economy in the context of a two-period-lived overlapping generations model. We assume that the old agents are heterogeneous in their labor efficiency and they continue working if their income exceeds the pension that can be received in the case of full retirement. We inspect the long-run effects of changes in key factors that determine the labor force participation of the elderly. While the main part of the study treats a neoclassical growth model, we also discuss a model with endogenous growth.