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Population Ageing and Pension Reform in a Small Open Economy with Non-Traded Goods

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Author Info

  • Leon Bettendorf

    ()
    (Department of Economics, Erasmus Universiteit Rotterdam)

  • Ben Heijdra

    ()
    (Department of Economics, University of Groningen)

Abstract

In this paper we study the implications of population ageing in an economy with a sizeable non-traded goods sector. To this effect a highly stylized micro-founded macro model is constructed in which the age structure of the population plays a non-trivial role. The model distinguishes separate birth and death probabilities (thus allowing for net population change), allows for age-dependent labour productivity (thus mimicing life-cycle saving), and includes a rudimentary pension system (thus allowing for intergenerational redistribution). The model is used to analytically study demographic and pension shocks.

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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 05-021/2.

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Date of creation: 17 Feb 2005
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Handle: RePEc:dgr:uvatin:20050021

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Web page: http://www.tinbergen.nl

Related research

Keywords: fertility rate; overlapping generations; pension reform; demographic shocks; non-traded goods;

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References

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  1. Buiter, Willem H, 1988. "Death, Birth, Productivity Growth and Debt Neutrality," Economic Journal, Royal Economic Society, vol. 98(391), pages 279-93, June.
  2. Alan J. Auerbach & Jinyong Cai & Laurence J. Kotlikoff, 1991. "U.S. Demographics and Saving: Predictions of Three Saving Models," NBER Working Papers 3404, National Bureau of Economic Research, Inc.
  3. Kotlikoff, Laurence J, 1979. "Social Security and Equilibrium Capital Intensity," The Quarterly Journal of Economics, MIT Press, vol. 93(2), pages 233-53, May.
  4. Giovannini, Alberto, 1988. "The real exchange rate, the capital stock, and fiscal policy," European Economic Review, Elsevier, vol. 32(9), pages 1747-1767, November.
  5. Philip L. Brock & Stephen J. Turnovsky, 1993. "The Dependent Economy Model with Both Traded and Non-Traded Capital Goods," NBER Working Papers 4500, National Bureau of Economic Research, Inc.
  6. Stephen J. Turnovsky, 1997. "International Macroeconomic Dynamics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262201119, January.
  7. Mayer, Wolfgang, 1974. "Short-Run and Long-Run Equilibrium for a Small Open Economy," Journal of Political Economy, University of Chicago Press, vol. 82(5), pages 955-67, Sept./Oct.
  8. van Wincoop, Eric, 1993. "Structural adjustment and the construction sector," European Economic Review, Elsevier, vol. 37(1), pages 177-201, January.
  9. Heijdra, Ben J., 2009. "Foundations of Modern Macroeconomics," OUP Catalogue, Oxford University Press, edition 2, number 9780199210695.
  10. Judd, Kenneth L., 1982. "An alternative to steady-state comparisons in perfect foresight models," Economics Letters, Elsevier, vol. 10(1-2), pages 55-59.
  11. James M. Poterba, 2001. "Demographic Structure And Asset Returns," The Review of Economics and Statistics, MIT Press, vol. 83(4), pages 565-584, November.
  12. 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.
  13. Søren Nielsen, 1994. "Social security and foreign indebtedness in a small open economy," Open Economies Review, Springer, vol. 5(1), pages 47-63, March.
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Citations

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Cited by:
  1. Fisher, Walter H. & Heijdra, Ben J., 2007. "Keeping up with the Ageing Joneses," Economics Series 204, Institute for Advanced Studies.
  2. Gabay, Daniel & Grasselli, Martino, 2012. "Fair demographic risk sharing in defined contribution pension systems," Journal of Economic Dynamics and Control, Elsevier, vol. 36(4), pages 657-669.
  3. Romain Restout, 2009. "The Balassa-Samuelson model in general equilibrium with markup variations," EconomiX Working Papers 2009-39, University of Paris West - Nanterre la Défense, EconomiX.
  4. Fisher, Walter H. & Heijdra, Ben J., 2008. "Growth and the Ageing Joneses," Economics Series 230, Institute for Advanced Studies.
  5. Nickel, Christiane & Rother, Philipp & Theophilopoulou, Angeliki, 2008. "Population ageing and public pension reforms in a small open economy," Working Paper Series 0863, European Central Bank.
  6. Gugushvili, Alexi, 2007. "Giving the ageing of the population how can countries afford pay-as-you-go social insurance pensions?," MPRA Paper 2869, University Library of Munich, Germany.

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