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Ageing, Retirement and Savings: A General Equilibrium Analysis

Author

Listed:
  • Mariano Kulish

    (Reserve Bank of Australia)

  • Kathryn Smith

    (Reserve Bank of Australia)

  • Christopher Kent

    (Reserve Bank of Australia)

Abstract

This paper studies the macroeconomic consequences of ageing in an overlapping-generations model with endogenous retirement. We study the behaviour of the economy when population ageing is driven by movements in fertility, changes in longevity, and a combination of both. To gauge the economic implications of these demographic changes we calibrate the model to match key features of the Australian economy. With either a fall in fertility or a rise in longevity, population ageing increases capital intensity in the long run. When fertility and longevity operate together, the increase in capital intensity is more than additive, and the share of life spent in retirement stays roughly constant. The dynamic response of the economy is sensitive to the relative strength of the two factors that drive ageing.

Suggested Citation

  • Mariano Kulish & Kathryn Smith & Christopher Kent, 2006. "Ageing, Retirement and Savings: A General Equilibrium Analysis," RBA Research Discussion Papers rdp2006-06, Reserve Bank of Australia.
  • Handle: RePEc:rba:rbardp:rdp2006-06
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    References listed on IDEAS

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    More about this item

    Keywords

    baby boom; endogenous retirement; longevity; OLG (overlapping generations);
    All these keywords.

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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