Advanced Search
MyIDEAS: Login to save this paper or follow this series

Pension reform, employment by age and long-run growth

Contents:

Author Info

  • Tim BUYSE

    ()
    (SHERPPA, Ghent University)

  • Freddy HEYLEN

    ()
    (SHERPPA, Ghent University and UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))

  • Renaat VAN DE KERCKHOVE

    (SHERPPA, Ghent University)

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.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://sites.uclouvain.be/econ/DP/IRES/2011025.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) in its series Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) with number 2011025.

as in new window
Length: 38
Date of creation: 30 Jun 2011
Date of revision:
Handle: RePEc:ctl:louvir:2011025

Contact details of provider:
Postal: Place Montesquieu 3, 1348 Louvain-la-Neuve (Belgium)
Fax: +32 10473945
Email:
Web page: http://www.uclouvain.be/ires
More information through EDIRC

Related research

Keywords: employment by age; endogenous growth; retirement; pension reform; overlapping generations;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Axel Boersch-Supan & Alexander Ludwig, 2005. "Aging, pension reform, and capital flows: A multi-country simulation model," Computing in Economics and Finance 2005 123, Society for Computational Economics.
  2. Alessandro Sommacal, 2006. "Pension systems and intragenenerational redistribution when labor supply is endogenous," Oxford Economic Papers, Oxford University Press, vol. 58(3), pages 379-406, July.
  3. Kaganovich, Michael & Zilcha, Itzhak, 1999. "Education, social security, and growth," Journal of Public Economics, Elsevier, vol. 71(2), pages 289-309, February.
  4. Alessandro Cigno, 2010. "How to Avoid a Pension Crisis: A Question of Intelligent System Design ," CESifo Economic Studies, CESifo, vol. 56(1), pages 21-37, March.
  5. Lee Ohanian & Andrea Raffo & Richard Rogerson, 2006. "Long-term changes in labor supply and taxes: evidence from OECD countries, 1956-2004," Research Working Paper RWP 06-16, Federal Reserve Bank of Kansas City.
  6. Barro, Robert J., 1990. "Government Spending in a Simple Model of Endogeneous Growth," Scholarly Articles 3451296, Harvard University Department of Economics.
  7. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  8. Romain Duval, 2003. "The Retirement Effects of Old-Age Pension and Early Retirement Schemes in OECD Countries," OECD Economics Department Working Papers 370, OECD Publishing.
  9. David de la Croix & Olivier Pierrard & Henri R. Sneessens, 2011. "Aging and Pensions in General Equilibrium: Labor Market Imperfections Matter," BCL working papers 62, Central Bank of Luxembourg.
  10. Walter Fisher & Christian Keuschnigg, 2010. "Pension reform and labor market incentives," Journal of Population Economics, Springer, vol. 23(2), pages 769-803, March.
  11. Michael Kaganovich & Volker Meier, 2012. "Social Security Systems, Human Capital, and Growth in a Small Open Economy," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 14(4), pages 573-600, 08.
  12. Stephen Nickell & Luca Nunziata & Wolfgang Ochel, 2005. "Unemployment in the OECD Since the 1960s. What Do We Know?," Economic Journal, Royal Economic Society, vol. 115(500), pages 1-27, 01.
  13. Boucekkine, Raouf, 1995. "An alternative methodology for solving nonlinear forward-looking models," Journal of Economic Dynamics and Control, Elsevier, vol. 19(4), pages 711-734, May.
  14. Tine Dhont & Freddy Heylen, 2008. "Why Do Europeans Work (Much) Less? It Is Taxes And Government Spending," Economic Inquiry, Western Economic Association International, vol. 46(2), pages 197-207, 04.
  15. Stokey, Nancy L & Rebelo, Sergio, 1995. "Growth Effects of Flat-Rate Taxes," Journal of Political Economy, University of Chicago Press, vol. 103(3), pages 519-50, June.
  16. Christian Jaag & Christian Keuschnigg & Mirela Keuschnigg, 2010. "Pension reform, retirement, and life-cycle unemployment," International Tax and Public Finance, Springer, vol. 17(5), pages 556-585, October.
  17. Ben J. Heijdra & Ward E. Romp, 2007. "Retirement, Pensions, and Ageing," CESifo Working Paper Series 1974, CESifo Group Munich.
  18. Richard Rogerson, 2007. "Taxation and Market Work: Is Scandinavia an Outlier?," NBER Working Papers 12890, National Bureau of Economic Research, Inc.
  19. Le Garrec, Gilles, 2012. "Social security, income inequality and growth," Journal of Pension Economics and Finance, Cambridge University Press, vol. 11(01), pages 53-70, January.
  20. Robert G. King & Sergio Rebelo, 1990. "Public Policy and Economic Growth: Developing Neoclassical Implications," NBER Working Papers 3338, National Bureau of Economic Research, Inc.
  21. Michael P. Devereux & Rachel Griffith & Alexander Klemm, 2002. "Corporate income tax reforms and international tax competition," Economic Policy, CEPR & CES & MSH, vol. 17(35), pages 449-495, October.
  22. P R Agénor, 2005. "Fiscal Policy and Endogenous Growth with Public Infrastructure," Centre for Growth and Business Cycle Research Discussion Paper Series 59, Economics, The Univeristy of Manchester.
  23. Willem H. Buiter & Kenneth M. Kletzer, 1992. "Permanent International Productivity Growth Differentials in an Integrated Global Economy," NBER Working Papers 4220, National Bureau of Economic Research, Inc.
  24. Alfonso R. Sánchez Martín, 2001. "Endogenous Retirement And Public Pension System Reform In Spain," Economics Working Papers we013503, Universidad Carlos III, Departamento de Economía.
  25. Ludwig, Alexander & Schelkle, Thomas & Vogel, Edgar, 2010. "Demographic Change, Human Capital and Welfare," MEA discussion paper series 10196, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
  26. Fougere M. & Harvey S. & Mercenier J. & Merette M., 2008. "Population Ageing, Time allocation and Human Capital: a General Equilibrium Analysis for Canada," Working Papers ERMES 0806, ERMES, University Paris 2.
  27. Sheshinski, Eytan, 1978. "A model of social security and retirement decisions," Journal of Public Economics, Elsevier, vol. 10(3), pages 337-360, December.
  28. Arcalean, Calin & Schiopu, Ioana, 2010. "Public versus private investment and growth in a hierarchical education system," Journal of Economic Dynamics and Control, Elsevier, vol. 34(4), pages 604-622, April.
  29. Kemnitz, Alexander & Wigger, Berthold U., 2000. "Growth and social security: the role of human capital," European Journal of Political Economy, Elsevier, vol. 16(4), pages 673-683, November.
  30. David Backus & Espen Henriksen & Kjetil Storesletten, 2007. "Taxes and the Global Allocation of Capital," NBER Working Papers 13624, National Bureau of Economic Research, Inc.
  31. Eric A. Hanushek & Ludger Woessmann, 2009. "Do Better Schools Lead to More Growth? Cognitive Skills, Economic Outcomes, and Causation," CESifo Working Paper Series 2524, CESifo Group Munich.
  32. Richard Rogerson & Johanna Wallenius, 2007. "Micro and Macro Elasticities in a Life Cycle Model With Taxes," NBER Working Papers 13017, National Bureau of Economic Research, Inc.
  33. Zhang, Jie, 1995. "Social security and endogenous growth," Journal of Public Economics, Elsevier, vol. 58(2), pages 185-213, October.
  34. Nicholas Barr, 2006. "(UBS Pensions Series 040) Pensions: Overview of Issues," FMG Discussion Papers dp562, Financial Markets Group.
  35. Zhang, Jie & Zhang, Junsen, 2003. "Long-run effects of unfunded social security with earnings-dependent benefits," Journal of Economic Dynamics and Control, Elsevier, vol. 28(3), pages 617-641, December.
  36. Blanchard, Olivier & Wolfers, Justin, 2000. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," Economic Journal, Royal Economic Society, vol. 110(462), pages C1-33, March.
  37. Feldstein, Martin S, 1974. "Social Security, Induced Retirement, and Aggregate Capital Accumulation," Journal of Political Economy, University of Chicago Press, vol. 82(5), pages 905-26, Sept./Oct.
  38. Docquier, Frederic & Michel, Philippe, 1999. " Education Subsidies, Social Security and Growth: The Implications of a Demographic Shock," Scandinavian Journal of Economics, Wiley Blackwell, vol. 101(3), pages 425-40, September.
  39. Bouzahzah, Mohamed & de la Croix, David & Docquier, Frédéric, 2000. "Policy Reforms and Growth in Computable OLG Economies," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2000027, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  40. Docquier, Frederic & Paddison, Oliver, 2003. "Social security benefit rules, growth and inequality," Journal of Macroeconomics, Elsevier, vol. 25(1), pages 47-71, March.
  41. Paul A. Samuelson, 1958. "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, University of Chicago Press, vol. 66, pages 467.
  42. Christophe Hachon, 2010. "Do Beveridgian pension systems increase growth?," Journal of Population Economics, Springer, vol. 23(2), pages 825-831, March.
  43. Benhabib Jess & Farmer Roger E. A., 1994. "Indeterminacy and Increasing Returns," Journal of Economic Theory, Elsevier, vol. 63(1), pages 19-41, June.
  44. Tine Dhont & Freddy Heylen, 2009. "Employment and growth in Europe and the US--the role of fiscal policy composition," Oxford Economic Papers, Oxford University Press, vol. 61(3), pages 538-565, July.
  45. Lindbeck, Assar & Persson, Mats, 2002. "The Gains from Pension Reform," Seminar Papers 712, Stockholm University, Institute for International Economic Studies.
  46. Whitehouse, Edward & Queisser, Monika, 2007. "Pensions at a glance: public policies across OECD countries," MPRA Paper 16349, University Library of Munich, Germany.
  47. Stephen Turnovsky, 1998. "Fiscal Policy, Elastic Labor Supply, and Endogenous Growth," Working Papers 0068, University of Washington, Department of Economics.
  48. Juillard, Michel, 1996. "Dynare : a program for the resolution and simulation of dynamic models with forward variables through the use of a relaxation algorithm," CEPREMAP Working Papers (Couverture Orange) 9602, CEPREMAP.
  49. Martin Feldstein, 2005. "Rethinking Social Insurance," American Economic Review, American Economic Association, vol. 95(1), pages 1-24, March.
  50. Peter Whiteford & Edward Whitehouse, 2006. "Pension Challenges and Pension Reforms in Oecd Countries," Oxford Review of Economic Policy, Oxford University Press, vol. 22(1), pages 78-94, Spring.
  51. F. Heylen & R. Van De Kerckhove & -, 2009. "Fiscal policy, employment by age, and growth in OECD economies," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 09/623, Ghent University, Faculty of Economics and Business Administration.
  52. Nicholas Barr, 2006. "Pensions: Overview of the Issues," Oxford Review of Economic Policy, Oxford University Press, vol. 22(1), pages 1-14, Spring.
  53. Edward Whitehouse & Anna D'Addio & Rafal Chomik & Andrew Reilly, 2009. "Two Decades of Pension Reform: What has been Achieved and What Remains to be Done?," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan, vol. 34(4), pages 515-535, October.
  54. Ludger Wößmann, 2000. "Schooling Resources, Educational Institutions, and Student Performance: The International Evidence," Kiel Working Papers 983, Kiel Institute for the World Economy.
  55. Glomm, Gerhard & Ravikumar, B, 1992. "Public versus Private Investment in Human Capital Endogenous Growth and Income Inequality," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 818-34, August.
  56. Helmuth Cremer & Jean-Marie Lozachmeur & Pierre Pestieau, 2008. "Social Security And Retirement Decision: A Positive And Normative Approach ," Journal of Economic Surveys, Wiley Blackwell, vol. 22(2), pages 213-233, 04.
  57. Robert Fenge & Pierre Pestieau, 2005. "Social Security and Early Retirement," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262062496, December.
  58. Alan J. Auerbach & Laurence J. Kotlikoff & Robert P. Hagemann & Giuseppe Nicoletti, 1989. "The Economic Dynamics of an Ageing Population: The Case of Four OECD Countries," OECD Economics Department Working Papers 62, OECD Publishing.
  59. Hu, Sheng Cheng, 1979. "Social Security, the Supply of Labor, and Capital Accumulation," American Economic Review, American Economic Association, vol. 69(3), pages 274-83, June.
  60. Alexander Ludwig & Thomas Schelkle & Edgar Vogel, 2011. "Online Appendix to "Demographic Change, Human Capital and Welfare"," Technical Appendices 08-168, Review of Economic Dynamics.
  61. Nicola Brandt & Jean-Marc Burniaux & Romain Duval, 2005. "Assessing the OECD Jobs Strategy: Past Developments and Reforms," OECD Economics Department Working Papers 429, OECD Publishing.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Vogel, Edgar & Ludwig, Alexander & Börsch-Supan, Axel, 2013. "Aging and Pension Reform: Extending the Retirement Age and Human Capital Formation," MEA discussion paper series 12257, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
  2. Heylen Freddy & Van de Kerckhove Renaat, 2013. "Employment by age, education, and economic growth: effects of fiscal policy composition in general equilibrium," The B.E. Journal of Macroeconomics, De Gruyter, vol. 13(1), pages 55, October.
  3. 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.
  4. T. Buyse & F. Heylen, 2012. "Leaving the empirical (battle)ground: Output and welfare effects of fiscal consolidation in general equilibrium," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 12/826, Ghent University, Faculty of Economics and Business Administration.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:ctl:louvir:2011025. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Anne DAVISTER-LOGIST).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.