We address the ways in which a government subsidy and labor flexibility affect optimal policies and retirement decisions using a continuous-time theoretical model with endogenous labor/leisure choice. In response to a government subsidy, working agents increase their overall consumption, leisure spending, and investment in risky assets, which is an intuitive finding. Labor flexibility has marginal effects on consumption and leisure when an agent's wealth is insufficient. However, when a working agent has enough wealth to enjoy maximum leisure, labor flexibility increases leisure spending and reduces risky investments. The impacts of the two features conflict in terms of retirement decisions (i.e. the optimal threshold wealth level is decreased by the subsidy and increased by labor welfare), while labor flexibility takes precedence. Furthermore, the government subsidy is more impactful in a bad economy than in a good economy.

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Purpose This paper aims to provide the necessity to activate long-term exchange-traded derivatives (ETD) in Korea. In the era of aging, low interest rates and low economic growth, the investment demand for long-term financial products, and its hedging demand have steadily increased. Unfortunately, long-term ETD do not trade in Korea, and this study presents political suggestions to invigorate long-term ETD based on overseas cases and empirical analysis. Specifically, this study suggests the necessity to activate exchange traded funds (ETFs) options, long-term Korea treasury bond futures and options and long-term Volatility Index of Korea Composite Stock Price Index future and options. The introduction of those long-term ETD not only contributes to providing long-term investment and hedging vehicles but also reduces market inefficiencies in the Korean industry of ETFs, bonds and structured products.

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