Age-Targeted Income Taxation, Labor Supply, and Retirement

Arbeitspapier

This paper studies the life-cycle effects of favorable marginal tax treatment of older workers on their optimal life cycle labor supply, retirement timing, and savings. I develop a structural model in continuous time where the life-cycle of a representative agent is divided into three distinct phases: pre-treatment, post-treatment, and retirement. Solutions for consumption/savings, labor supply/leisure, and retirement timing are then obtained by solving the model as a salvage value problem. I then calibrate the model to Swedish earnings data and find that the increased extensive margin labor supply is partially offset by a reduction in hours worked during the pre-treatment period. The total effect is however an increase in life-cycle labor supply and consumption.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 8988

Classification and Topics

• Classification: Wirtschaft ; Intertemporal Household Choice; Life Cycle Models and Saving ; Time Allocation and Labor Supply ; Retirement; Retirement Policies
• Subject: retirement age ; life cycle ; tax heterogeneity ; savings consumption ; leisure

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Gustafsson, Johan
• Event: Veröffentlichung
• (who): Center for Economic Studies and Ifo Institute (CESifo)
• (where): Munich
• (when): 2021

Further information

• Handle: http://hdl.handle.net/10419/235358
• Last update: 10.03.2025, 11:43 AM CET