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A simulation model for the demographic transition in the OECD: Data requirements, model structure and calibration

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  • Fehr, Hans
  • Halder, Gitte
  • Jokisch, Sabine
  • Kotlikoff, Laurence J.

Abstract

The developed world stands at the fore of a phenomenal demographic transition. Over the next 30 years the number of elderly in the OECD countries will more than double. At the same time, the number of workers available to pay the elderly their government-guaranteed pension and health care benefits will rise by less than 10 percent. These two demographic trends are expected to put enormous pressure on social security systems and government expenses. To address the consequences of the aging process, this paper develops a dynamic, intergenerational, and interregional demographic life-cycle model. The model has three regions - the U.S., the EU and Japan - which exchange goods and capital. The model features immigration, age-specific fertility, life span extension, life span uncertainty, bequests arising from incomplete annuitization, and intra-cohort heterogeneity. After introducing the theoretical model, we simulate the transition path for the three considered regions keeping current immigration constant, assuming the projected increase in life expectancy and the continuation of current social security and health care policies. --

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Bibliographic Info

Paper provided by University of Würzburg, Chair for Monetary Policy and International Economics in its series W.E.P. - Würzburg Economic Papers with number 45.

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Date of creation: 2003
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Handle: RePEc:zbw:wuewep:45

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Related research

Keywords: Demographic transition; overlapping generations (OLG); computable general equilibrium models (CGE);

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References

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  1. Whitehouse, Edward, 2001. "Pension systems in 15 countries compared: the value of entitlements," MPRA Paper 14751, University Library of Munich, Germany.
  2. Beetsma, R.M.W.J. & Bettendorf , L.J.H. & Broer, D.P., 2003. "The budgeting and economic consequences of ageing in the Netherlands," Open Access publications from Tilburg University urn:nbn:nl:ui:12-383717, Tilburg University.
  3. David Altig, 2001. "Simulating Fundamental Tax Reform in the United States," American Economic Review, American Economic Association, vol. 91(3), pages 574-595, June.
  4. Isabelle Joumard, 2002. "Tax systems in European Union countries," OECD Economic Studies, OECD Publishing, vol. 2002(1), pages 91-151.
  5. 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.
  6. Fehr, Hans, 1999. "Welfare Effects of Dynamic Tax Reforms," Beiträge zur Finanzwissenschaft, Mohr Siebeck, Tübingen, edition 1, volume 5, number urn:isbn:9783161470165, July.
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Citations

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Cited by:
  1. Sabine Jokisch & Laurence J. Kotlikoff, 2005. "Simulating the Dynamic Macroeconomic and Microeconomic Effects of the FairTax," NBER Working Papers 11858, National Bureau of Economic Research, Inc.
  2. Hans Fehr & Sabine Jokisch & Laurence Kotlikoff, 2004. "Fertility, Mortality, and the Developed World’s Demographic Transition," CESifo Working Paper Series 1326, CESifo Group Munich.
  3. Hans Fehr & Sabine Jokisch, & Laurence J. Kotlikoff, 2005. "Will China Eat Our Lunch or Take Us to Dinner?—Simulating the Transition Paths of the U.S., E.U., Japan, and China," Working Papers wp102, University of Michigan, Michigan Retirement Research Center.
  4. Jokisch, Sabine & Halder, Gitte & Fehr, Hans, 2004. "A Simulation Model for the Demographic Transition in Germany : Data Requirements, Model Structure and Calibration," W.E.P. - Würzburg Economic Papers 48, University of Würzburg, Chair for Monetary Policy and International Economics.
  5. Simon Gilchrist & Fabio M. Natalucci & Egon Zakrajsek, 2007. "Investment and the Cost of Capital: New Evidence from the Corporate Bond Market," Boston University - Department of Economics - Working Papers Series WP2007-027, Boston University - Department of Economics.
  6. Hans Fehr & Sabine Jokisch & Laurence J. Kotlikoff, 2005. "Will China Eat Our Lunch or Take Us Out to Dinner? Simulating the Transition Paths of the U.S., EU, Japan, and China," NBER Working Papers 11668, National Bureau of Economic Research, Inc.

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