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Labor Market Effects of Population Aging

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  • Axel Boersch-Supan
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    Abstract

    This paper analyzes effects of population aging on the labor market and determines their broad implications for public policy. It takes Germany as an example, but it equally applies to the other large economies in Continental Europe. The paper argues that, alongside the amply discussed, demographically-determined increase in the contribution and tax burden which is responsible for the ever widening gap between gross and disposable earnings, two other important areas of policy deserve greater attention. First, it is unlikely that the decline in the relative size of the economically active population will be offset by higher capital intensity. Labor productivity will need to increase over and above this mechanism in order to compensate for the impact of population aging on domestic production. Hence, we will need more education and training to speed up human capital formation. Second, the shift in the age structure will also change the structure of demand for goods. This, in turn, will have large effects on the pattern of employment across different sectors of the economy and will require a substantial increase in labor mobility in order to accommodate these structural changes.

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    Bibliographic Info

    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8640.

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    Date of creation: Dec 2001
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    Publication status: published as Borsch-Supan, Axel. "Labor Market Effects of Population Aging." Labour, Special Issue 17 (2003): 5-44.
    Handle: RePEc:nbr:nberwo:8640

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    1. Dominik H. Enste & Friedrich Schneider, 2000. "Shadow Economies: Size, Causes, and Consequences," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 77-114, March.
    2. Robin L. Lumsdaine & James H. Stock & David A. Wise, 1992. "Three Models of Retirement: Computational Complexity versus Predictive Validity," NBER Chapters, in: Topics in the Economics of Aging, pages 21-60 National Bureau of Economic Research, Inc.
    3. Borsch-Supan, Axel, 2000. "Incentive effects of social security on labor force participation: evidence in Germany and across Europe," Journal of Public Economics, Elsevier, vol. 78(1-2), pages 25-49, October.
    4. James H. Stock & David A. Wise, 1990. "The Pension Inducement to Retire: An Option Value Analysis," NBER Chapters, in: Issues in the Economics of Aging, pages 205-230 National Bureau of Economic Research, Inc.
    5. Laurence J. Kotlikoff & David A. Wise, 1989. "Employee Retirement and a Firm's Pension Plan," NBER Chapters, in: The Economics of Aging, pages 279-334 National Bureau of Economic Research, Inc.
    6. Axel Boersch-Supan & Alexander Ludwig & Joachim Winter, 2001. "Aging and International Capital Flows," NBER Working Papers 8553, National Bureau of Economic Research, Inc.
    7. Richard Disney, 1996. "Can We Afford to Grow Older?," MIT Press Books, The MIT Press, edition 1, volume 1, number 026204157x, December.
    8. Sikandar Siddiqui, 1997. "The pension incentive to retire: Empirical evidence for West Germany," Journal of Population Economics, Springer, vol. 10(4), pages 463-486.
    9. Borsch-Supan, Axel, 2000. "A Model under Siege: A Case Study of the German Retirement Insurance System," Economic Journal, Royal Economic Society, vol. 110(461), pages F24-45, February.
    10. Fehr, Hans, 1999. "Pension reform during the demographic transition," W.E.P. - Würzburg Economic Papers 8, University of Würzburg, Chair for Monetary Policy and International Economics.
    11. Palacios, Robert & Rocha, Roberto, 1998. "The Hungarian pension system in transition," Social Protection Discussion Papers 20048, The World Bank.
    12. Borsch-Supan, Axel & Schnabel, Reinhold, 1998. "Social Security and Declining Labor-Force Participation in Germany," American Economic Review, American Economic Association, vol. 88(2), pages 173-78, May.
    13. Disney, Richard, 1999. "Notional accounts as a pension reform strategy : an evaluation," Social Protection Discussion Papers 21302, The World Bank.
    14. Cigno, Alessandro, 1995. "Public pensions with endogenous fertility: Comment on Nishimura and Zhang," Journal of Public Economics, Elsevier, vol. 57(1), pages 169-173, May.
    15. Riphahn, Regina T. & Schmidt, Peter, 1995. "Determinanten des Rentenzugangs: Lockt der Ruhestand oder drängt der Arbeitsmarkt?," ZEW Discussion Papers 95-10, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
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    Cited by:
    1. Grant Johnston, 2005. "Women’s participation in the labour force," Treasury Working Paper Series 05/06, New Zealand Treasury.
    2. Dimova, Ralitza & Wolff, François-Charles, 2006. "Do Downward Private Transfers Enhance Maternal Labor Supply? Evidence from around Europe," IZA Discussion Papers 2469, Institute for the Study of Labor (IZA).
    3. Giorgio Brunello, 2007. "The Effects of Cohort Size on European Earnings," "Marco Fanno" Working Papers 0036, Dipartimento di Scienze Economiche "Marco Fanno".
    4. Jürgen Janger & Johann Scharler & Alfred Stiglbauer, 2006. "The Potential Growth Prospects of the Austrian Economy — Methods and Determinants," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 24–52.
    5. Jeff Borland, 2005. "Transitions to Retirement: A Review," Melbourne Institute Working Paper Series wp2005n03, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    6. Casper Ewijk & Maikel Volkerink, 2012. "Will Ageing Lead to a Higher Real Exchange Rate for the Netherlands?," De Economist, Springer, vol. 160(1), pages 59-80, March.
    7. repec:dgr:uvatin:2007064 is not listed on IDEAS

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