Reform and Backlash to Reform : Economic Effects of Ageing and Retirement Policy

Using a stochastic general equilibrium model with overlapping generations, this paper studies (i) the effects on both extensive and intensive labor supply responses to changes in fertility rates, and (ii) the potential of a retirement reform to mitigate the effects of fertility changes on labor supply. In order to neutralize the effects on effective labor supply of a fertility decline, a retirement reform, designed to increase labor supply at the extensive margin, is found to simultaneously reduce labor supply at the intensive margin. This backlash to retirement reform requires the statutory retirement age to increase more than proportionally to fertility changes in order to compensate for endogenous responses of the intensity of labor supply. The robustness of this result is checked against alternative model specifications and calibrations relevant to an economic region such as Europe.

Bibliographic Details

Main Authors:	Jensen, Svend E. Hougaard, Jorgensen, Ole Hagen
Format:	Policy Research Working Paper biblioteca
Language:	English
Published:	2010-11-01
Subjects:	AGE COMPOSITION, AGGREGATE INCOME, ALLOCATION OF RESOURCES, BABIES, BABY, BABY BOOM, BUSINESS CYCLE, CAPITAL INVESTMENT, CHANGES IN FERTILITY, CONSUMPTION INCREASES, CONTRIBUTION RATE, DEBT, DECLINE IN FERTILITY, DEMOGRAPHIC TRENDS, DEPENDENCY RATIOS, DISCOUNT RATE, DOWNWARD PRESSURE, EARLY RETIREMENT, ECONOMIC DECISIONS, ECONOMIC GROWTH, ECONOMIC IMPLICATIONS, ECONOMIC THEORY, ECONOMICS, ELASTICITY, ELASTICITY OF SUBSTITUTION, ELDERLY, ENDOGENOUS VARIABLES, EXOGENOUS VARIABLE, FERTILITY, FERTILITY DECLINE, FERTILITY RATE, FERTILITY RATES, FINANCIAL MARKETS, FISCAL POLICY, FUTURE RESEARCH, GENERAL EQUILIBRIUM, GLOBAL POPULATION, GROSS RETURN, GROWTH RATE, HUMAN CAPITAL, IMPERFECT COMPETITION, INCOME, INDEXATION, INNOVATIONS, INTERNATIONAL MOBILITY, LABOR ECONOMICS, LABOR MARKET, LABOR SUPPLY, LABOUR, LABOUR FORCE, LABOUR FORCES, LABOUR MARKET, LABOUR SUPPLY, LONGEVITY ADJUSTMENT, LOW FERTILITY, LOWER FERTILITY, MARKET EQUILIBRIUM, MONETARY POLICY, NUMBER OF CHILDREN, NUMBER OF WORKERS, OPPORTUNITY COST, OPTIMIZATION, OVERLAPPING GENERATIONS MODEL, PAYROLL TAX, PENSION, PENSION CONTRIBUTION, PENSION CONTRIBUTIONS, PENSION REFORM, PENSION SYSTEM, PENSION SYSTEMS, POLICY MAKERS, POLICY RESEARCH, POLICY RESEARCH WORKING PAPER, POLITICAL ECONOMY, POPULATION DYNAMICS, POPULATION GROWTH, POPULATION GROWTH RATE, PRODUCTIVITY, PROGRESS, RATE OF GROWTH, REAL WAGES, REPLACEMENT RATE, RESPECT, RETIREES, RETIREMENT, RETIREMENT AGE, RETIREMENT PERIOD, RETIREMENT PERIODS, RETIREMENT POLICY, RETIREMENT SAVINGS, SOCIAL SECURITY, SOCIAL SECURITY REFORM, SURVIVAL PROBABILITIES, TAX RATE, TAXATION, UTILITY FUNCTION, WAGE RATE, WAGES, WEALTH, WORKER, WORKERS, WORKING HOURS,
Online Access:	http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20101109093239 http://hdl.handle.net/10986/3952
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