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Longevity, Working Lives and Public Finances

Author

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  • Lassila, Jukka
  • Valkonen, Tarmo

Abstract

Can longer working lives bring sufficient tax revenues to pay for the growing public health and care expenditure that longer lifetimes cause? We review studies concerning retirement decisions and pension policies, the role of mortality in health and long-term care costs, and errors in mortality projections. We combine key results into a numerical OLG model where changes in mortality have direct effects both on working careers and on per capita use of health and long-term care services. The model has been calibrated to the Finnish economy and demographics. Although there are huge uncertainties concerning future health and long-term care expenditure when people live longer, our simulations show that without policies directed to disability admission rules and old-age pension eligibility ages, working lives are unlikely to extend sufficiently. But, importantly, with such policies it seems quite possible that generations enjoying longer lifetimes can also pay for the full costs by working longer.

Suggested Citation

  • Lassila, Jukka & Valkonen, Tarmo, 2014. "Longevity, Working Lives and Public Finances," ETLA Working Papers 24, The Research Institute of the Finnish Economy.
  • Handle: RePEc:rif:wpaper:24
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    File URL: http://www.etla.fi/wp-content/uploads/ETLA-Working-Papers-24.pdf
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    References listed on IDEAS

    as
    1. Jukka Lassila & Tarmo Valkonen, 2007. "The Finnish Pension Reform of 2005," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 32(1), pages 75-94, January.
    2. Lassila, Jukka & Valkonen, Timo, 2008. "Population ageing and fiscal sustainability in Finland : a stochastic analysis," Research Discussion Papers 28/2008, Bank of Finland.
    3. Alho, Juha M., 1990. "Stochastic methods in population forecasting," International Journal of Forecasting, Elsevier, vol. 6(4), pages 521-530, December.
    4. Torbe M. Andersen, 2012. "Fiscal sustainability and fiscal policy targets," Economics Working Papers 2012-15, Department of Economics and Business Economics, Aarhus University.
    5. Jukka Lassila & Tarmo Valkonen & Juha M. Alho, 2011. "Assessing the sustainability of health and long-term care financing - and the usefulness of policy guidelines based on demographic forecasts," Chapters,in: Three takes sustainability. VATT Publications 58, pages 151-175 The Research Institute of the Finnish Economy.
    6. Lassila, Jukka & Määttänen, Niku & Valkonen, Tarmo, . "Linking retirement age to life expectancy – what happens to working lives and income distribution?," ETLA B, The Research Institute of the Finnish Economy, number 260, settembre.
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    Cited by:

    1. Heikki Tikanmaki & Hannu Sihvonen & Janne Salonen, 2015. "Distributional Effects of the Forthcoming Finnish Pension Reform - a Dynamic Microsimulation Approach," International Journal of Microsimulation, International Microsimulation Association, vol. 8(3), pages 75-98.

    More about this item

    Keywords

    life expectancy; working careers; health and long-term care expenditure; fiscal sustainability;

    JEL classification:

    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • H68 - Public Economics - - National Budget, Deficit, and Debt - - - Forecasts of Budgets, Deficits, and Debt
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts

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