Quasi-hyperbolic discounting and retirement

Peter Diamond, Botond Köszegi*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

Abstract (may include machine translation)

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.

Original languageEnglish
Pages (from-to)1839-1872
Number of pages34
JournalJournal of Public Economics
Volume87
Issue number9-10
DOIs
StatePublished - 1 Sep 2003
Externally publishedYes

Keywords

  • Laibson's model
  • Quasi-hyperbolic discounting
  • Retirement

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