Reform and backlash to reform: economic effects of ageing and retirement policy

Svend E. Hougaard Jensen and Ole Hagen Jorgensen

No 5470, Policy Research Working Paper Series from The World Bank

Abstract: Using a stochastic general equilibrium model with overlapping generations, this paper studies (i) the effects on both extensive and intensive labor supply responses to changes in fertility rates, and (ii) the potential of a retirement reform to mitigate the effects of fertility changes on labor supply. In order to neutralize the effects on effective labor supply of a fertility decline, a retirement reform, designed to increase labor supply at the extensive margin, is found to simultaneously reduce labor supply at the intensive margin. This backlash to retirement reform requires the statutory retirement age to increase more than proportionally to fertility changes in order to compensate for endogenous responses of the intensity of labor supply. The robustness of this result is checked against alternative model specifications and calibrations relevant to an economic region such as Europe.

Keywords: Labor Policies; Labor Markets; Pensions&Retirement Systems; Economic Theory&Research; Population Policies (search for similar items in EconPapers)
Date: 2010-11-01
New Economics Papers: this item is included in nep-age, nep-dge and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:wbk:wbrwps:5470

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