Social Security and Early Retirement in an Overlapping-Generations Growth Model

This paper explains why workers retire earlier, and earlier at the same time
as society becomes more and more indebted through increasing pay-as-you-
go pension liabilities. To do so, we extend the standard two-overlapping-
generations growth model to allow for endogenous labor participation in the
later period of life. We show that the rate of participation declines as the
size of social security system increases. We also show that mandatory early
retirement many be socially desirable in case of underaccumulation.