Why it is possible that wages and pensions can increase simultaneously in an ageing and stagnating % A theoretical investigation and a simulation of the German case

Peter Kesting

Applied Economics, 2010, vol. 42, issue 6, 727-738

Abstract: This article investigates the possibilities and restrictions of inter-generational income development for ageing and stagnating economies. In a first step, the basic logic of ageing will be investigated in a simple dynamic model. In particular, the investigation points out the existence of the demographic distribution mass and its meaning for inter-generational income development. It proves that the demographic distribution mass makes it possible for wages and pensions to grow simultaneously in an ageing and stagnating economy. In a second step, the development of wages and pensions is simulated for the German case through to the year 2050. It is demonstrated that (under normal circumstances) it can be expected that the burden from ageing can almost always be over-compensated by the economic growth of the respective year. Against this background, ageing appears to be rather a problem of acceptance and income distribution than that of real income reductions.

Date: 2010
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DOI: 10.1080/00036840701720796

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