Research On The Optimal Legal Retirement Age Based On The Overlapping Generation Model

Since 2012,with the aging of the population,the issue of delayed retirement has caused widespread concern and discussion.Many scholars have suggested that the current “one size fits all” statutory compulsory retirement system in China is unreasonable.We should consider the retirement needs of different workers and adopt a flexible retirement system.However,in reality,most countries in the world have clearly defined the age at which workers receive their pensions,and China's current legal retirement age regulations have been in use since 1951.So,is the statutory retirement system widely implemented in various countries reasonable? If so,is there an optimal legal retirement age? We use the qualitative analysis method,quantitative analysis method,and the comparative analysis method to analysis these issues.First,by establishing a two-generation endowment overlapping generation model,we analyze the retirement behavior of high and low labor negative utility under the free and flexible retirement policy and statutory mandatory retirement policy,and compare the social welfare level under the two systems through numerical simulation.We find that under the framework of China's current social security system,compared with the free and flexible retirement policy,the statutory compulsory retirement policy can bring about improvements in social welfare,and the existence of statutory retirement age is reasonable.Then,we explore the reasons for the statutorily mandatory retirement policy to bring about welfare improvements.We have found that the introduction of a compulsory retirement policy will indeed artificially cause labor consumption fluctuations between different periods,forming a distortion effect and bringing welfare losses,which is also proposed by many scholars.But in fact,the statutory mandatory retirement policy can also reduce the income during the early retirement period,increase the income during the delayed retirement period,encourage workers to delay the retirement age,and control the moral hazard of workers.It is a good explanation for the fact that statutory mandatory retirement policies can lead to improved benefits.Finally,by weighing incentive effects and distortion effects,there is an optimal statutory retirement age to maximize social welfare.Since the legal retirement age is reasonable,how to choose the optimal legal retirement age to maximize social benefits? Through analysis,we find that the introduction of the statutorily mandatory retirement system is mainly by setting the statutory retirement age and artificially changing the division of the elderly in the free and flexible retirement system,thereby changing the level of social welfare.By weighing the effects of different legal retirement ages on the incentive and distortion effects,maximum social benefits can be achieved.At the same time,during the analysis of the model,it can also be seen that early retirement benefits and delayed retirement benefits,as important components of statutory mandatory retirement policies,will change the income level of workers in different periods,and affects optimal legal retirement age levels.Imagine that if the early retirement benefits are the same as the normal pension benefits,and the income level during the delayed retirement period is the same as the income level at work,the statutorily mandatory retirement policy is essentially the same as the free and flexible retirement policy.It is impossible to achieve the effect of improving social welfare.Properly reducing early retirement benefits and increasing delayed retirement benefits can change the distortion effect and incentive effect,and further affect the optimal legal retirement age level.The innovation of this article is:1.From the perspective of social welfare,quantitatively compare the free and flexible retirement system with the statutorily mandatory retirement system.2.Discover that statutory compulsory retirement policy can not only distort workers' utility,but also effectively control moral hazards,encourage workers to delay the retirement age,and improve social welfare.3.Discover the optimal legal retirement age decision mechanism,that is,maximize the social welfare by weighing the impact of the legal retirement age on the incentive and distortion effects.