Old folks and spoiled brats : Why the baby boomers' saving crisis need not be that bad
AbstractWe study the impact of an anticipated "baby boom" in an overlapping generations economy. The rise of the working population lowers the wage, and the high demand for assets causes a rise in the price of capital which will be reversed when the baby boomers leave the work-force. However, the swings in factor prices are substantially dampened if we allow for more than two generations, endogenous labor supply, and convex capital adjustment costs. This is mainly due to the intertemporal shifts in labor market participation that can be observed if agents work for more than one period. Optimal saving and labor supply decisions of the baby boomers' preceding and subsequent generations partly offset the impact of the unfavorable demographic shock. Accordingly, the impact of a baby boom on the welfare of different generations crucially depends on the elasticity of labor supply.
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Bibliographic InfoPaper provided by Université de Lausanne, Faculté des HEC, DEEP in its series Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) with number 01.07.
Length: 27 pages
Date of creation: Jun 2001
Date of revision:
Contact details of provider:
Postal: Université de Lausanne, Faculté des HEC, DEEP, Internef, CH-1015 Lausanne
Phone: ++41 21 692.33.64
Fax: ++41 21 692.33.05
Web page: http://www.hec.unil.ch/deep/publications/cahiers/series
More information through EDIRC
baby boom; asset prices; labour market adjustments;
Other versions of this item:
- Butler, M. & Harms, P., 2001. "Old Folks and Spoiled Brats: Why the baby Boomers' Saving Crisis Need Not be that Bad," Discussion Paper 2001-42, Tilburg University, Center for Economic Research.
- E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
- E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
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