Retirement with Perfect Insurance
November 2003
Research Paper
This publication is part of collection
| Related Files |
|---|
View PDF Version
(2003-0973.pdf, 0.4MB) |
This paper focuses on the relation between worker's productivity and retirement decision. Assuming that productivity follows geometric Brownian motion with drift, there exists such a level of productivity for which it is optimal to retire. The worker buys an insurance, which gives a constant income and retirement benefits in exchange for the total output. The level of income and benefits is set to maximize lifetime utility. In such framework we find the retirement threshold of productivity and the probability of retirement.
Keywords
Classifications using
Journal of Economic Literature (JEL) Classification System
- G22 : Insurance; Insurance Companies
- J26 : Retirement; Retirement Policies
- E24 : Employment; Unemployment; Wages
Automatically Extracted Terms
- productivity
- retirement
- income
- value
- utility
- lifetime
- probability
- risk aversion
- insurance
- benefit
- result
- level
- worker
- lifetime utility
- death
- threshold
- retirement threshold
- equation
- function
- budget constraint
