Sharing Demographic Risk--Who Is Afraid of the Baby Bust?

Alexander Ludwig and Michael Reiter

American Economic Journal: Economic Policy, 2010, vol. 2, issue 4, 83-118

Abstract: We model the reaction of a PAYG pension system to demographic shocks. We compare the ex ante first best and second best solution of a Ramsey planner with full commitment to the outcome under simple third best rules. The model is calibrated to the German economy. We find that the German system comes relatively close to the second-best solution, and that the recent baby-boom/baby-bust cycle leads to welfare losses of about 5 percent of lifetime consumption for some cohorts. We argue that it is crucial for all our results to correctly model the labor market distortions arising from the pension system. (JEL D91, E62, H55, J11)

JEL-codes: D91 E62 H55 J11 (search for similar items in EconPapers)
Date: 2010
Note: DOI: 10.1257/pol.2.4.83
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (45)

Downloads: (external link)
http://www.aeaweb.org/articles.php?doi=10.1257/pol.2.4.83 (application/pdf)
http://www.aeaweb.org/aej/pol/data/2009-0091_data.zip (application/zip)
http://www.aeaweb.org/aej/pol/app/2009-0091_app.pdf (application/pdf)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
Working Paper: Sharing demographic risk: who is afraid of the baby bust? (2009)
Working Paper: Sharing Demographic Risk – Who is Afraid of the Baby Bust? (2009)
Working Paper: Sharing Demographic Risk – Who is Afraid of the Baby Bust? (2008)
Working Paper: Sharing Demographic Risk - Who is Afraid of the Baby Bust? (2008)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aea:aejpol:v:2:y:2010:i:4:p:83-118

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

Access Statistics for this article

American Economic Journal: Economic Policy is currently edited by Matthew Shapiro

More articles in American Economic Journal: Economic Policy from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().