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Analyzing labour supply of elderly people: a life-cycle approach

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  • Frank van Erp

    (CPB Netherlands Bureau for Economic Policy Analysis)

  • Paul de Hek

Abstract

In light of the ageing of the Dutch society, policy measures aim at increasing the participation rate of elderly workers, particularly in the age-group between 55 and 64. This paper develops a stylized numerical simulation model. This model describes consumption, savings and labour supply behaviour over the life cycle to analyze the labour-market implications of such proposals. For example, we simulate a shift in the (normal) retirement age from 65 to 67, the elimination of the Social Security premium exemption after age 65, and a premium on first-tier pension benefits if the commencement date of these benefits is postponed. Each of these reforms affect the economic outcomes via wealth effects, income effects and inter- and intratemporal substitution effects. The stylized model offers a profound theoretical underpinning which helps us to understand these policy effects over the entire life cycle of individuals. However, the numerical outcomes should be taken with some caution as the model ignores insights of behavioural economics (such as ‘framing effects’).

Suggested Citation

  • Frank van Erp & Paul de Hek, 2009. "Analyzing labour supply of elderly people: a life-cycle approach," CPB Document 179, CPB Netherlands Bureau for Economic Policy Analysis.
    • Handle: RePEc:cpb:docmnt:179
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    Citations

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    Cited by:

    1. Montizaan, R.M. & de Grip, A. & Fouarge, D., 2015. "Training access, reciprocity, and expected retirement age," Research Memorandum 005, Maastricht University, Graduate School of Business and Economics (GSBE).
    2. Andries de Grip & Didier Fouarge & Raymond Montizaan, 2013. "How Sensitive are Individual Retirement Expectations to Raising the Retirement Age?," De Economist, Springer, vol. 161(3), pages 225-251, September.
    3. van Sonsbeek, Jan-Maarten, 2010. "Micro simulations on the effects of ageing-related policy measures," Economic Modelling, Elsevier, vol. 27(5), pages 968-979, September.
    4. Frank van Erp & Niels Vermeer & Daniel van Vuuren, 2013. "Non-financial determinants of retirement," CPB Discussion Paper 243.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    5. Buchholtz, Sonia & Gaska, Jan & Góra, Marek, 2018. "Pension Strategies of Workers in a Country Getting Old before Getting Rich," IZA Discussion Papers 11830, Institute of Labor Economics (IZA).
    6. Frank Erp & Niels Vermeer & Daniel Vuuren, 2014. "Non-financial Determinants of Retirement: A Literature Review," De Economist, Springer, vol. 162(2), pages 167-191, June.
    7. Joëlle Noailly & Roger Smeets, 2013. "Directing Technical Change from Fossil-Fuel to Renewable Energy Innovation: An Empirical Application Using Firm-Level Patent Data," CPB Discussion Paper 237.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    8. Frank van Erp & Niels Vermeer & Daniel van Vuuren, 2013. "Non-financial determinants of retirement," CPB Discussion Paper 243, CPB Netherlands Bureau for Economic Policy Analysis.

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    More about this item

    JEL classification:

    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions

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