Baby-Boom Aging and Average Living Standards
A calibrated overlapping generations model is used to investigate the effect on living standards of the aging baby boom. The relative scarcity of labor when baby boomers are old raises the wage-rental ratio by an amount that is sufficient to ensure that the post baby-boom generation can enjoy a modest increase in living standards - despite facing higher taxes. Nevertheless, the baby-boom cohort itself suffers a drop in consumption, and when the two generations are considered as a group, overall living standards fall by a modest amount. These results are robust to several changes in specification: the existence of liquidity constraints, alternative assumptions regarding individuals' expectations concerning future interest rates, and different fiscal policies concerning the tax treatment of private saving for retirement. Policy initiatives that bring significant hardship today to avoid a future "crisis" are not supported by the standard overlapping generations model.
|Date of creation:||Feb 2002|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (905) 525-9140 ext. 22765
Fax: (905) 521-8232
Web page: http://www.mcmaster.ca/economics/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Alwyn Young, 2001. "Demographic Fluctuations, Generational Welfare and Intergenerational Transfers," NBER Working Papers 8530, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:mcm:qseprr:368. 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: ()
If references are entirely missing, you can add them using this form.