IDEAS home Printed from https://ideas.repec.org/p/bok/wpaper/1510.html
   My bibliography  Save this paper

Population Ageing and Extension of Retirement Age(Quantitative Analysis using Overlapping Generation Model) (in Korean)

Author

Listed:
  • JaeHwa Hong

    () (the Faculty of Economics, Seoul National University)

  • TaeSu Kang

    () (The Bank of Korea)

Abstract

This paper studies the quantitative effects of population ageing caused mainly by declines in fertility and mortality rates in the Korean economy. It also examines the overall macroeconomic effects of the extension of mandatory retirement age on an ageing economy. A decrease in mortality rate raises aggregate capital input in the economy since individuals save more for retirement due to the longer life expectancy and the enlarged proportion of the middle- and older-aged population in the total population. In contrast, an increase in aggregate labor is negligible since most of the population increases are attributable to the increase in the population over 60, most of whom are out of the labor force. A decrease in the fertility rate reduces both aggregate capital and labor inputs because of the reduction in total population, especially in young and middle aged groups. With a reasonable calibration (the mortality rate decreases by 1% a year; and the population growth rate declines from 0.7% to 0.3%), our model forecasts that the aggregate production will decrease by 15% and the pension system will run a big budget deficit with more retirees and smaller number of workers. The model also predicts that the introduction of extension of retirement age (3 years, from 57 to 60) can alleviate the negative effects of population ageing by increasing both aggregate capital and labor inputs and reducing pension deficits.

Suggested Citation

  • JaeHwa Hong & TaeSu Kang, 2015. "Population Ageing and Extension of Retirement Age(Quantitative Analysis using Overlapping Generation Model) (in Korean)," Working Papers 2015-10, Economic Research Institute, Bank of Korea.
  • Handle: RePEc:bok:wpaper:1510
    as

    Download full text from publisher

    File URL: https://www.bok.or.kr/ucms/cmmn/file/fileDown.do?menuNo=500788&atchFileId=KO_00000000000115554&fileSn=1
    File Function: Working Paper, 2015
    Download Restriction: no

    Other versions of this item:

    More about this item

    Keywords

    Population ageing; Extension of retirement age; Overlapping generation model;

    JEL classification:

    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bok:wpaper:1510. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Economic Research Institute). General contact details of provider: http://edirc.repec.org/data/imbokkr.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.