Pension reform, employment by age and long-run growth

Tim Buyse, Freddy Heylen and Renaat van de Kerckhove

No 2011025, LIDAM Discussion Papers IRES from Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES)

Abstract: We study the effects of pension reform in a four-period OLG model for an open economy where hours worked by three active generations, education of the young, the retirement decision of older workers, and aggregate per capita growth, are endogenous. Next to the characteristics of the pension system, our model assigns an important role to the composition of fiscal policy. We find that the model explains the facts remarkably well for many OECD countries. Our simulation results prefer an intelligent pay-as-you-go pension system above a fully-funded private system. When it comes to promoting employment, human capital, growth, and welfare, positive effects in a PAYG system are the strongest when it includes a tight link between individual labor income (and contributions) and the pension, and when it attaches a high weight to labor income earned as an older worker to compute the pension assessment base.

Keywords: employment by age; endogenous growth; retirement; pension reform; overlapping generations (search for similar items in EconPapers)
JEL-codes: E62 H55 J22 O41 (search for similar items in EconPapers)
Pages: 38
Date: 2011-06-30
New Economics Papers: this item is included in nep-age, nep-cmp, nep-dge, nep-lab and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Journal Article: Pension reform, employment by age, and long-run growth (2013)
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