Understanding the life-cycle interactions between investments in human capital, retirement choices and pension savings is highly policy-relevant. Most Western governments will be confronted with the consequences of demographic ageing in the upcoming decennia. Tax bases will shrink, due to the retirement of older generations of workers. Outlays on state pensions and healthcare will rise substantially. Pension systems with strong intergenerational risk sharing face difficulties as well, since it will become more difficult and costly to smooth pension risks over different generations by means of contribution adjustments. At the same time, individuals do not invest in skills, because they expect to retire early. And, individuals retire early because they have not invested in skills. As a result, many European countries are confronted with a vicious circle of low investments in on-the-job training of older workers and strong incentives to retire early.

doi.org/10.1057/9780230307346, hdl.handle.net/1765/95790
Erasmus School of Economics

Jacobs, B. (2010). Human capital, retirement and saving. In Ageing, Health and Pensions in Europe: An Economic and Social Policy Perspective (pp. 283–317). doi:10.1057/9780230307346