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Decreasing fertility vs increasing longevity: Raising the retirement age in the context of ageing processes

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  • Bielecki, Marcin
  • Goraus, Karolina
  • Hagemejer, Jan
  • Tyrowicz, Joanna

Abstract

Given the decreasing fertility and increasing longevity, in many countries the policy debate emphasizes the role of either raising the minimum eligible retirement age (MERA) or raising fertility to avoid adverse changes in the population structure. In this paper we evaluate the welfare and macroeconomic effects of increasing the retirement age for various demographic scenarios under three major pension systems (defined benefit, notionally defined contribution and funded defined contribution). We compare populations with decreasing fertility, increasing longevity and one subject to both of these changes, and show that the welfare effects of raising MERA stem mainly from longevity. We show that – for increasing longevity – raising the retirement age is universally welfare enhancing for all living and future cohorts, regardless of the pension system and fertility. Finally, we show scope for further welfare gains if productivity is relatively high at old ages.

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  • Bielecki, Marcin & Goraus, Karolina & Hagemejer, Jan & Tyrowicz, Joanna, 2016. "Decreasing fertility vs increasing longevity: Raising the retirement age in the context of ageing processes," Economic Modelling, Elsevier, vol. 52(PA), pages 125-143.
  • Handle: RePEc:eee:ecmode:v:52:y:2016:i:pa:p:125-143
    DOI: 10.1016/j.econmod.2015.02.020
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    Cited by:

    1. Pestieau, Pierre & Racionero, Maria, 2016. "Harsh occupations, life expectancy and social security," Economic Modelling, Elsevier, vol. 58(C), pages 194-202.
    2. repec:eee:hapoch:v1_713 is not listed on IDEAS
    3. Bellido, Héctor & Molina, José Alberto & Solaz, Anne & Stancanelli, Elena, 2016. "Do children of the first marriage deter divorce?," Economic Modelling, Elsevier, vol. 55(C), pages 15-31.

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