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Labor Market Effects of Population Aging

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  • Axel Boersch-Supan

Abstract

This paper analyzes effects of population aging on the labor market and determines their broad implications for public policy. It takes Germany as an example, but it equally applies to the other large economies in Continental Europe. The paper argues that, alongside the amply discussed, demographically-determined increase in the contribution and tax burden which is responsible for the ever widening gap between gross and disposable earnings, two other important areas of policy deserve greater attention. First, it is unlikely that the decline in the relative size of the economically active population will be offset by higher capital intensity. Labor productivity will need to increase over and above this mechanism in order to compensate for the impact of population aging on domestic production. Hence, we will need more education and training to speed up human capital formation. Second, the shift in the age structure will also change the structure of demand for goods. This, in turn, will have large effects on the pattern of employment across different sectors of the economy and will require a substantial increase in labor mobility in order to accommodate these structural changes.

Suggested Citation

  • Axel Boersch-Supan, 2001. "Labor Market Effects of Population Aging," NBER Working Papers 8640, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:8640
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    References listed on IDEAS

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    1. Sikandar Siddiqui, 1997. "The pension incentive to retire: Empirical evidence for West Germany," Journal of Population Economics, Springer;European Society for Population Economics, vol. 10(4), pages 463-486.
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    4. Robin L. Lumsdaine & James H. Stock & David A. Wise, 1992. "Three Models of Retirement: Computational Complexity versus Predictive Validity," NBER Chapters,in: Topics in the Economics of Aging, pages 21-60 National Bureau of Economic Research, Inc.
    5. Axel Boersch-Supan & Alexander Ludwig & Joachim Winter, 2001. "Aging and International Capital Flows," NBER Working Papers 8553, National Bureau of Economic Research, Inc.
    6. Borsch-Supan, Axel & Schnabel, Reinhold, 1998. "Social Security and Declining Labor-Force Participation in Germany," American Economic Review, American Economic Association, vol. 88(2), pages 173-178, May.
    7. Richard Disney, 1996. "Can We Afford to Grow Older?," MIT Press Books, The MIT Press, edition 1, volume 1, number 026204157x, May.
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    9. Palacios, Robert & Rocha, Roberto, 1998. "The Hungarian pension system in transition," Social Protection and Labor Policy and Technical Notes 20048, The World Bank.
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    Cited by:

    1. Casper Ewijk & Maikel Volkerink, 2012. "Will Ageing Lead to a Higher Real Exchange Rate for the Netherlands?," De Economist, Springer, vol. 160(1), pages 59-80, March.
    2. Torben Dall Schmidt & Aki Kangasharju & Timo Mitze & Daniel Rauhut, 2014. "The impact of aging on regional employment: Linking spatial econometrics and population projections for a scenario analysis of future labor market outcomes in Nordic regions," Economics and Business Letters, Oviedo University Press, vol. 3(4), pages 232-246.
    3. Ralitza Dimova & François-Charles Wolff, 2011. "Do downward private transfers enhance maternal labor supply? Evidence from around Europe," Journal of Population Economics, Springer;European Society for Population Economics, vol. 24(3), pages 911-933, July.
    4. Grant Johnston, 2005. "Women’s participation in the labour force," Treasury Working Paper Series 05/06, New Zealand Treasury.
    5. Jürgen Janger & Johann Scharler & Alfred Stiglbauer, 2006. "The Potential Growth Prospects of the Austrian Economy — Methods and Determinants," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 24-52.
    6. Giorgio Brunello, 2010. "The effects of cohort size on European earnings," Journal of Population Economics, Springer;European Society for Population Economics, vol. 23(1), pages 273-290, January.
    7. Jeff Borland, 2005. "Transitions to Retirement: A Review," Melbourne Institute Working Paper Series wp2005n03, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.

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