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New Age Thinking: Alternative Ways of Measuring Age, Their Relationship to Labor Force Participation, Government Policies and GDP

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Author Info

  • Gopi Shah Goda

    ()
    (Stanford University)

  • John Shoven

    ()
    (Stanford Institue for Economic Policy Research)

Abstract

The current practice of measuring age as years-since-birth distorts important behavior such as retirement, saving, and the discussion of dependency ratios. Two alternative measures of age are explored: mortality risk and remaining life expectancy. With these alternative measures, the huge wave of elderly forecast for the first half of this century doesn’t look like a huge wave at all. By conventional 65+ standards, the fraction of the population that is elderly will grow by about 66 percent. However, the fraction of the population that is above a mortality rate that corresponds to 65+ today will grow by only 20 percent. In a separate application of age measurement, I examine the consequences of stabilizing labor force participation by age with alternative age definitions. If labor force participation were to remain dynamic with respect to remaining life expectancy, rather than labor force participation remaining fixed, then there would be 9.6 percent more total labor supply by 2050 in the U.S. This additional labor supply could help finance entitlement programs amongst other things. GDP would be between seven and ten percent higher by 2050 if retirement lengths stabilize. Several policies are examined that would encourage longer work careers.

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File URL: http://www-siepr.stanford.edu/repec/sip/08-056.pdf
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Bibliographic Info

Paper provided by Stanford Institute for Economic Policy Research in its series Discussion Papers with number 08-056.

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Date of creation: Aug 2009
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Handle: RePEc:sip:dpaper:08-056

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Related research

Keywords: mortality risk; life expectancy; age; age measurement; retirement;

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  1. Gopi Shah Goda & John B. Shoven & Sita Nataraj Slavov, 2009. "Removing the Disincentives in Social Security for Long Careers," NBER Chapters, in: Social Security Policy in a Changing Environment, pages 21-38 National Bureau of Economic Research, Inc.
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