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Labor supply and retirement policy in an overlapping generations model with stochastic fertility

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  • Jorgensen, Ole Hagen
  • Jensen, Svend E. Hougaard

Abstract

Using a stochastic general equilibrium model with overlapping generations, this paper studies a policy rule for the retirement age aiming at offsetting the effects on the supply of labor following fertility changes. The authors find that the retirement age should increase more than proportionally to the direct fall in labor supply caused by a fall in fertility. The robustness of this result is checked against alternative model specifications and parameter values. The efficacy of the policy rule depends crucially on the link between the preference for leisure and the response of the intensive margin of labor supply to changes in the statutory retirement age. The model has subsequently been calibrated for Brazil by Jorgensen (2010), in the context of the Brazil Aging Study.

Suggested Citation

  • Jorgensen, Ole Hagen & Jensen, Svend E. Hougaard, 2010. "Labor supply and retirement policy in an overlapping generations model with stochastic fertility," Policy Research Working Paper Series 5382, The World Bank.
    • Handle: RePEc:wbk:wbrwps:5382
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    References listed on IDEAS

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    1. David De La Croix & Géraldine Mahieu & Alexandra Rillaers, 2004. "How Should the Allocation of Resources Adjust to the Baby Bust?," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 6(4), pages 607-636, October.
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    Cited by:

    1. Jacopo Bonchi & Guido Caracciolo, 2022. "Declining US Natural Interest Rate: Quantifying and Qualifying the Role of Pensions," Working Papers 506, University of Milano-Bicocca, Department of Economics, revised Dec 2022.
    2. Michele Gragnolati & Ole Hagen Jorgensen & Romero Rocha & Anna Fruttero, 2011. "Growing Old in an Older Brazil : Implications of Population Ageing on Growth, Poverty, Public Finance, and Service Delivery," World Bank Publications - Books, The World Bank Group, number 2351.

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    More about this item

    Keywords

    Labor Markets; Labor Policies; Pensions&Retirement Systems; Economic Theory&Research; Population Policies;
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