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Old Europe Ages: Reforms and Reform Backlashes

In: Demography and the Economy

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  • Axel Börsch-Supan
  • Alexander Ludwig

Abstract

The extent of the demographic changes in Europe is dramatic and will deeply affect future labor, financial and goods markets. The expected strain on public budgets and especially social security has already received prominent attention, but aging poses many other economic challenges that threaten growth and living standards if they remain unaddressed. This paper focuses on three large Continental European countries: France, Germany, and Italy. These countries have large pay-as-you-go pension systems and vulnerable labor markets. At the same time, they show remarkable resistance against pension and labor market reform. While there is no shortage of reform proposals to address population aging, most of those focused on pension and labor market reform, little is known about behavioral reactions to such reforms. This paper therefore sheds light on the potential benefits of pension and labor market reform for growth and living standards, taking into account behavioral reactions to specific reforms. Which behavioral reactions will strengthen, which will weaken reform policies? Can Old Europe maintain its standard of living even if behavioral reactions offset some of the current reform efforts?

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  • John B. Shoven, 2010. "Demography and the Economy," NBER Books, National Bureau of Economic Research, Inc, number shov08-1.
    This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 8412.

    Handle: RePEc:nbr:nberch:8412

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    Cited by:
    1. Jensen, Svend E. Hougaard & Jorgensen, Ole Hagen, 2010. "Reform and backlash to reform : economic effects of ageing and retirement policy," Policy Research Working Paper Series 5470, The World Bank.
    2. Jan Hagemejer & Krzysztof Makarski & Joanna Tyrowicz, 2013. "Efficiency of the pension reform: the welfare effects of various fiscal closures," Working Papers 2013-23, Faculty of Economic Sciences, University of Warsaw.
    3. Alessandra Cataldi & Stephan Kampelmann & François Rycx, 2012. "Does it pay to be productive? The case of age groups," International Journal of Manpower, Emerald Group Publishing, vol. 33(3), pages 264-283, March.
    4. Karolina Goraus & Krzysztof Makarski & Joanna Tyrowicz, 2014. "Does social security reform reduce gains from increasing the retirement age?," Working Papers 2014-03, Faculty of Economic Sciences, University of Warsaw.
    5. T. Buyse & F. Heylen & R. Van De Kerckhove, 2012. "Pension reform in an OLG model with heterogeneous abilities," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 12/810, Ghent University, Faculty of Economics and Business Administration.

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