Old folks and spoiled brats: Why the baby boomers' saving crisis need not be that bad

Monika Bütler () and Philipp Harms

Cahiers de Recherches Economiques du Département d'économie from Université de Lausanne, Faculté des HEC, Département d’économie

Abstract: We study the impact of an anticipated "baby boom" in an overlapping generations economy. The rise of the working population lowers the wage, and the high demand for assets causes a rise in the price of capital which will be reversed when the baby boomers leave the work-force. However, the swings in factor prices are substantially dampened if we allow for more than two generations, endogenous labor supply, and convex capital adjustment costs. This is mainly due to the intertemporal shifts in labor market participation that can be observed if agents work for more than one period. Optimal saving and labor supply decisions of the baby boomers' preceding and subsequent generations partly offset the impact of the unfavorable demographic shock. Accordingly, the impact of a baby boom on the welfare of different generations crucially depends on the elasticity of labor supply.

Keywords: baby boom; asset prices; labour market adjustments (search for similar items in EconPapers)
JEL-codes: E2 E6 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2001-06
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Related works:
Working Paper: Old Folks and Spoiled Brats: Why the baby Boomers' Saving Crisis Need Not be that Bad (2001)
Working Paper: Old Folks and Spoiled Brats: Why the baby Boomers' Saving Crisis Need Not be that Bad (2001)
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Persistent link: https://EconPapers.repec.org/RePEc:lau:crdeep:01.07

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