Author(s)  
Rodolfo Manuelli, Ananth Seshadri, Yongseok Shin

We develop a model of retirement and human capital investment to study the effects of tax and retirement policies. Workers choose the supply of raw labor (career length) and also the human capital embodied in their labor. Our model explains a significant fraction of the US-Europe difference in schooling and retirement. The model predicts that reforms of the European retirement policies modeled after the US can deliver 15-35 percent gains in per-worker output in the long run. Increased human capital investment in and out of school accounts for most of the gains, with relatively small changes in career length.

JEL Codes  
E24: Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital
J24: Human Capital; Skills; Occupational Choice; Labor Productivity
Keywords  
lifetime labor supply
human capital