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How Aging of the Labor Force Affects Equilibrium Unemployment

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Author Info
Pascal Hetze
Carsten Ochsen () (University of Rostock)

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Abstract

This paper argues that aging of the labor force affects job creation and job destruction. To analyze this, we extend a standard model of equilibrium unemployment and search in the labor market by the distinction between age specific separation risks and a productivity differential between young and elderly workers. Based on the theo- retical model, we identify four regimes of changes in the Beveridge Curve and job creation which can occur if the age structure varies. We also present an econometric model to find out which country relates to which regime. According to the estimates we can identify all four cases. For example, Spain and the US may experience positive effects on employment when the labor force grows older. In contrast to this, the unemployment rate in Germany and Japan will rise as a consequence of the increase in the share of elderly workers.

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File URL: http://www.wiwi.uni-rostock.de/fileadmin/Institute/VWL/VWL-Institut/RePEc/pdf/wp057thuenen.pdf
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Publisher Info
Paper provided by University of Rostock, Institute of Economics, Germany in its series Thuenen-Series of Applied Economic Theory with number 57.

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Length: 39 pages
Date of creation: 2005
Date of revision:
Handle: RePEc:ros:wpaper:57

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Related research
Keywords: Vacancies and Separations; Unemployment; Job Creation; Aging of the Labor Force; Demographic Change;

Other versions of this item:

Find related papers by JEL classification:
J63 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Turnover; Vacancies; Layoffs
J64 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment: Models, Duration, Incidence, and Job Search
J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
J10 - Labor and Demographic Economics - - Demographic Economics - - - General

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References listed on IDEAS
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  1. Burgess, Simon M., 1994. "Matching models and labour market flows," European Economic Review, Elsevier, vol. 38(3-4), pages 809-816, April. [Downloadable!] (restricted)
  2. Hoyt Bleakley & Jeffrey C. Fuhrer, 1997. "Shifts in the Beveridge Curve, job matching, and labor market dynamics," New England Economic Review, Federal Reserve Bank of Boston, issue Sep, pages 3-19. [Downloadable!]
  3. Acemoglu, D, 1996. "Technology, Unemployment and Efficiency," Working papers 96-26, Massachusetts Institute of Technology (MIT), Department of Economics.
    Other versions:
  4. Axel Börsch-Supan & Ismail Düzgün & Matthias Weiss, 2005. "Altern und Produktivität: Zum Stand der Forschung," MEA discussion paper series 05073, Mannheim Research Institute for the Economics of Aging (MEA), University of Mannheim. [Downloadable!]
    Other versions:
  5. anonymous, 2001. "Seismic shifts: the economic impact of demographic change - a conference sponsored by the Federal Reserve Bank of Boston," Conference Series ; [Proceedings], Federal Reserve Bank of Boston. [Downloadable!]
  6. Peter Batey & Moss Madden, 1999. "The employment impact of demographic change: A regional analysis," Papers in Regional Science, Springer, vol. 78(1), pages 69-87. [Downloadable!] (restricted)
  7. Isaac Ehrlich & Jinyoung Kim, 2005. "Social Security, Demographic Trends, and Economic Growth: Theory and Evidence from the International Experience," NBER Working Papers 11121, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  8. Pissarides, Christopher A. & Wadsworth, Jonathan, 1994. "On-the-job search: Some empirical evidence from Britain," European Economic Review, Elsevier, vol. 38(2), pages 385-401, February. [Downloadable!] (restricted)
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    Other versions:
  11. Coles, Melvyn G & Smith, Eric, 1996. "Cross-Section Estimation of the Matching Function: Evidence from England and Wales," Economica, London School of Economics and Political Science, vol. 63(252), pages 589-97, November. [Downloadable!] (restricted)
    Other versions:
  12. Friedrich Breyer & Klaus Stolte, 2000. "Demographic Change, Endogenous Labor Supply and the Political Feasibility of Pension Reform," Discussion Papers of DIW Berlin 202, DIW Berlin, German Institute for Economic Research. [Downloadable!]
    Other versions:
  13. Layard, R. & Nickell, S., . "Layard-Nickell," Instructional Stata datasets for econometrics layardnickell, Boston College Department of Economics. [Downloadable!]
  14. Miles, David, 1999. "Modelling the Impact of Demographic Change upon the Economy," Economic Journal, Royal Economic Society, vol. 109(452), pages 1-36, January. [Downloadable!] (restricted)
    Other versions:
  15. Jane Sneddon Little & Robert K. Triest, 2002. "The impact of demographic change on U. S. labor markets," New England Economic Review, Federal Reserve Bank of Boston, issue Q 1, pages 47 - 68. [Downloadable!]
    Other versions:
  16. Barbara Petrongolo & Christopher A. Pissarides, 2001. "Looking into the Black Box: A Survey of the Matching Function," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 390-431, June. [Downloadable!] (restricted)
    Other versions:
  17. Burda, Michael C, 1992. "Unemployment, Labour Market Institutions and Structural Change in Eastern Europe," CEPR Discussion Papers 746, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  18. Burgess, Simon M, 1993. "A Model of Competition between Unemployed and Employed Job Searchers: An Application to the Unemployment Outflow Rate in Britain," Economic Journal, Royal Economic Society, vol. 103(420), pages 1190-204, September. [Downloadable!] (restricted)
  19. Olivier Jean Blanchard & Peter A. Diamond, 1991. "The Aggregate Matching Function," NBER Working Papers 3175, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  20. Barbara A. Butrica & Richard W. Johnson & Karen E. Smith & Eugene Steuerle, 2004. "Does Work Pay at Older Ages?," Working Papers, Center for Retirement Research at Boston College 2004-30, Center for Retirement Research. [Downloadable!]
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