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Old Europe Ages. Can it Still Prosper?

Author

Listed:
  • Börsch-Supan, Axel

    (Asian Development Bank Institute)

  • Ludwig, Alexander

    (Asian Development Bank Institute)

Abstract

Population aging will be a major determinant of long-run economic development in industrial and developing countries. The extent of the demographic changes is dramatic in some countries and will deeply affect future labor, financial, and goods markets. The expected strain on public budgets and especially on social security has already received prominent attention, but aging poses many other economic challenges that threaten productivity and growth if they remain unaddressed. There is no shortage of policy proposals to address population aging. However, little is known about behavioral reactions, e.g., to pension and labor market reform. This paper sheds light on such reactions in three large Continental European countries. France, Germany, and Italy have large pay-as-you-go pension systems and vulnerable labor markets. At the same time, these countries show remarkable resistance against pension and labor market reform. Key issues taken up in this paper are interactions between pension and labor market policies, and the behavioral reactions to reform. Which behavioral reactions will strengthen, which will weaken reform policies? Can Old Europe prosper even if behavioral reactions counter current reform efforts?

Suggested Citation

  • Börsch-Supan, Axel & Ludwig, Alexander, 2009. "Old Europe Ages. Can it Still Prosper?," ADBI Working Papers 168, Asian Development Bank Institute.
  • Handle: RePEc:ris:adbiwp:0168
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    File URL: http://www.adbi.org/working-paper/2009/11/25/3387.old.europe.ages/
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    More about this item

    Keywords

    aging pension labor reform; labor supply reactions reform; aging europe reform reactions;

    JEL classification:

    • D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure

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