Mortality Change, the Uncertainty Effect and the Retirement
Sebnem Kalemli-Ozcan and David N. Weil ,
( 15 )
Journal of Economic Growth

We examine the role of declining mortality in explaining the rise of retirement over the course of the 20th century. We construct a model in which individuals make labor/leisure choices over their lifetimes subject to uncertainty about their dates of death. In an environment with high mortality, an individual who saves for retirement faces a high risk of dying before he can enjoy his planned leisure. In this case, the optimal plan is for people to work until they die. As mortality falls, however, it becomes optimal to plan, and save for, retirement.

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