Aging and pensions in general equilibrium: Labor market imperfections matter

David de la Croix, Olivier Pierrard and Henri Sneessens

Journal of Economic Dynamics and Control, 2013, vol. 37, issue 1, 104-124

Abstract: We re-examine the effects of population aging and pension reforms in an OLG model with labor market frictions. The most important feature brought about by labor market frictions is the connection between the interest rate and the unemployment rate. Exogenous shocks (such as aging) leading to lower interest rates also imply lower equilibrium unemployment rates, because lower capital costs stimulate labor demand and induce firms to advertise more vacancies. These effects may be reinforced by increases in the participation rate of older workers, induced by the higher wage rates and the larger probability of finding a job. These results imply that neglecting labor market frictions and employment rate dynamics may seriously bias the evaluation of pension reforms when they have an impact on the equilibrium interest rate.

Keywords: Overlapping generations; Search unemployment; Labor force participation; Aging; Pensions; Labor market (search for similar items in EconPapers)
JEL-codes: E24 H55 J26 J64 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (54)

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Related works:
Working Paper: Aging and pensions in general equilibrium: labor market imperfections matter (2013)
Working Paper: Aging and Pensions in General Equilibrium: Labor Market Imperfections Matter (2011)
Working Paper: Aging and Pensions in General Equilibrium: Labor Market Imperfections Matter (2010)
Working Paper: Aging and Pensions in General Equilibrium: Labor Market Imperfections Matter (2010)
Working Paper: Aging and Pensions in General Equilibrium: Labor Market Imperfections Matter (2010)
Working Paper: Ageing, Pensions and The Labour Market (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:37:y:2013:i:1:p:104-124

DOI: 10.1016/j.jedc.2012.06.011

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