Retirement age and optimal taxation

It is often argued that implicit taxation on continued activity of elderly workers is responsible for the widely observed trend towards early retirement. In a world of laissez-faire or of first-best efficiency, there would be no such implicit taxation. This raises the question of whether a bias in the benefit formula in favor of early retirement is necessarily the sign of a bad policy. We show that this implicit tax on potsponed retirement can be due to the desire by public authorities of using social security for redistribution when non-distortionary tools are not available. We also examine possible ways to mitigate these distorsions, for instance, through disability testing.