The economics of early retirement

Abstract

The trend in most of the industrialised counties is in the direction of decreasing labour force participation of older workers. The steady withdrawal of workers from the workforce at a younger age suggests that retirement income is gradually increasing and/or that older workers are increasingly being forced out of the labour market. Regardless of whether early retirement can be traced to the labour supply or the labour demand side of the labour market, it constitutes a withdrawal of resources from production, a lowered tax base, and an increased burden on pension and fiscal systems. This paper identifies and discusses alternative theories on why people retire early.