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Longevity, Working Lives and Public Finances

Jukka Lassila and Tarmo Valkonen

No 24, ETLA Working Papers from The Research Institute of the Finnish Economy

Abstract: Can longer working lives bring sufficient tax revenues to pay for the growing public health and care expenditure that longer lifetimes cause? We review studies concerning retirement decisions and pension policies, the role of mortality in health and long-term care costs, and errors in mortality projections. We combine key results into a numerical OLG model where changes in mortality have direct effects both on working careers and on per capita use of health and long-term care services. The model has been calibrated to the Finnish economy and demographics. Although there are huge uncertainties concerning future health and long-term care expenditure when people live longer, our simulations show that without policies directed to disability admission rules and old-age pension eligibility ages, working lives are unlikely to extend sufficiently. But, importantly, with such policies it seems quite possible that generations enjoying longer lifetimes can also pay for the full costs by working longer.

Keywords: life expectancy; working careers; health and long-term care expenditure; fiscal sustainability (search for similar items in EconPapers)
JEL-codes: H30 H63 H68 J11 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2014-04-09
New Economics Papers: this item is included in nep-age, nep-cmp, nep-dge, nep-hea, nep-lab, nep-pbe and nep-pub
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Citations: View citations in EconPapers (1)

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