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

Population ageing in a small open economy – some policy experiments with a tractable general equilibrium model

Contents:

Author Info

  • Kilponen , Juha

    ()
    (Bank of Finland Research)

  • Kinnunen , Helvi

    ()
    (Bank of Finland)

  • Ripatti , Antti

    ()
    (Bank of Finland)

Abstract

This paper extends Gertler’s (1999) tractable overlapping generations model with life-cycle features by allowing for distortionary taxation, demographic transition and stochastic variation in demographic structure. The model is then used to study demographic change in the small open economy of Finland. Simulations highlight the key role played by labour market responses to ageing. When the responses of labour supply, wages, and hence private consumption, to higher taxation are consistently accounted for, population ageing has clearly much larger effects on public finance, when compared to mechanical sustainability calculations. Stochastic simulations suggest that lengthening of working time has only a modest alleviating effect on the fiscal burden of ageing. This is due to the fact that stochastic variation in the length of working time has only a relatively small effect on the model’s dependency ratio. Variation in life expectancy is clearly much more important.

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://www.suomenpankki.fi/en/julkaisut/tutkimukset/keskustelualoitteet/Documents/0628netti.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Bank of Finland in its series Research Discussion Papers with number 28/2006.

as in new window
Length: 45 pages
Date of creation: 23 Dec 2006
Date of revision:
Handle: RePEc:hhs:bofrdp:2006_028

Contact details of provider:
Postal: Bank of Finland, P.O. Box 160, FI-00101 Helsinki, Finland
Web page: http://www.suomenpankki.fi/en/
More information through EDIRC

Related research

Keywords: ageing; general equilibrium; public finance; demographic uncertainty;

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. Mark Gertler, 1997. "Government Debt and Social Security in a Life-Cycle Economy," NBER Working Papers 6000, National Bureau of Economic Research, Inc.
  2. Farmer, Roger E A, 1990. "Rince Preferences," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 105(1), pages 43-60, February.
  3. Olivier J. Blanchard, 1984. "Debt, Deficits and Finite Horizons," NBER Working Papers 1389, National Bureau of Economic Research, Inc.
  4. Freystätter, Hanna, 2003. "Price setting behavior in an open economy and the determination of Finnish foreign trade prices," Scientific Monographs, Bank of Finland E:25/2003, Bank of Finland.
  5. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
  6. Jukka Railavo, 2004. "Stability consequences of fiscal policy rules," Macroeconomics, EconWPA 0404020, EconWPA.
  7. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780198774501, October.
  8. Christian Keuschnigg & Mirela Keuschnigg, 2004. "Aging, Labor Markets and Pension Reform in Austria," University of St. Gallen Department of Economics working paper series 2004 2004-03, Department of Economics, University of St. Gallen.
  9. Cooley, Thomas F., 1999. "Government debt and social security in a life-cycle economy : A comment," Carnegie-Rochester Conference Series on Public Policy, Elsevier, Elsevier, vol. 50(1), pages 111-117, June.
  10. Robert Fenge & Martin Werding, 2003. "Ageing and Fiscal Imbalances Across Generations: Concepts of Measurement," CESifo Working Paper Series 842, CESifo Group Munich.
  11. Betts, Caroline & Devereux, Michael B., 1996. "The exchange rate in a model of pricing-to-market," European Economic Review, Elsevier, vol. 40(3-5), pages 1007-1021, April.
  12. Juha Kilponen & Torsten Santavirta, 2004. "Competition and Innovation - Microeconometric Evidence using Finnish Data," Research Reports 113, Government Institute for Economic Research Finland (VATT).
  13. Betts, Caroline & Devereux, Michael B., 2000. "Exchange rate dynamics in a model of pricing-to-market," Journal of International Economics, Elsevier, vol. 50(1), pages 215-244, February.
  14. Weil, Philippe, 1989. "Overlapping families of infinitely-lived agents," Journal of Public Economics, Elsevier, vol. 38(2), pages 183-198, March.
  15. Betts, Caroline & Devereux, Michael B., 2000. "Erratum to "Exchange rate dynamics in a model of pricing-to-market": [Journal of International Economics 50 (2000) 214-244]," Journal of International Economics, Elsevier, vol. 52(1), pages 207-208, October.
  16. Railavo , Jukka, 2004. "Stability consequences of fiscal policy rules," Research Discussion Papers 1/2004, Bank of Finland.
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. Mourinho Félix, Ricardo & Almeida, Vanda & Castro, Gabriela, 2008. "Improving competition in the non-tradable goods and labour markets: the Portuguese case," MPRA Paper 13945, University Library of Munich, Germany.
  2. Lassila , Jukka & Valkonen, Tarmo, 2008. "Population ageing and fiscal sustainability in Finland: a stochastic analysis," Research Discussion Papers 28/2008, Bank of Finland.
  3. Charles Yuji HORIOKA & Wataru SUZUKI & Tatsuo HATTA, 2007. "Aging, Savings, and Public Pensions in Japan," Asian Economic Policy Review, Japan Center for Economic Research, Japan Center for Economic Research, vol. 2(2), pages 303-319.
  4. Jokivuolle, Esa & Kilponen , Juha & Kuusi, Tero, 2007. "GDP at risk in a DSGE model: an application to banking sector stress testing," Research Discussion Papers 26/2007, Bank of Finland.
  5. Ricardo Félix & Gabriela Castro & José Maria & Paulo Júlio, 2013. "Fiscal Multipliers in a Small Euro Area Economy: How Big Can They Get in Crisis Times?," EcoMod2013 5307, EcoMod.

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:hhs:bofrdp:2006_028. 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: (Minna Nyman).

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.