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To work or to work out: a moral-hazard interpretation of labor supply, retirement, and investments in longevity

Published online by Cambridge University Press:  13 October 2009

STEFAN HUPFELD
STEFAN HUPFELD*
Affiliation:
Department of Economics, University of Konstanz, Germany
*
(e-mail: Stefan.Hupfeld@gmx.de)
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Abstract

In a moral-hazard model with multiple tasks, an agent engages in different activities, labelled work, delayed retirement, and work out (investments in longevity). The latter imposes higher effort costs on weekly labor supply, but increases possibilities for life time labor supply. Work out does not affect aggregate output and does therefore not accrue to the benefit of the principal. Second-best incentives for work out are U-shaped in the agent's ability, and so is the effort level supplied by the agent. These theoretical findings are supported by recent empirical evidence on longevity, which is not always monotonically increasing in ability.

Type
Articles
Information
Journal of Pension Economics & Finance , Volume 9 , Issue 2 , April 2010 , pp. 219 - 234
Copyright
Copyright © Cambridge University Press 2009

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