The macroeconomics of early retirement

Early retirement was introduced after the appearance of redundant middle-aged workers, not entitled to pensions. This distortionary policy reduces human capital accumulation and economic growth, but shifts part of the tax burden on future generations. Why was it adopted? Alternative policies, which do not introduce long-term distortions, but impose a larger cost on the current generation of workers, were blocked by a coalition of high income workers, who did not plan to retire early, but sought to reduce the current tax burden, and low income workers, who expected to retire early and to benefit from the early retirement pension. (C) 2004 Elsevier B.V. All rights reserved.