Reform and backlash to reform : economic effects of ageing and retirement policy
Using a stochastic general equilibrium model with overlapping generations, this paper studies (i) the effects on both extensive and intensive labor supply responses to changes in fertility rates, and (ii) the potential of a retirement reform to mitigate the effects of fertility changes on labor supply. In order to neutralize the effects on effective labor supply of a fertility decline, a retirement reform, designed to increase labor supply at the extensive margin, is found to simultaneously reduce labor supply at the intensive margin. This backlash to retirement reform requires the statutory retirement age to increase more than proportionally to fertility changes in order to compensate for endogenous responses of the intensity of labor supply. The robustness of this result is checked against alternative model specifications and calibrations relevant to an economic region such as Europe.
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- 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.
- Alexandra Rillaers & David de la Croix & Geraldine Mahieu, 2003. "How Should The Allocation Of Resources Adjust To The Baby Bust?," Working Papers. Serie AD 2003-27, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
- de la Croix, David & Mahieu, Géraldine & Rillaers, Alexandra, 2000. "How should retirement policy adjust to the baby bust ?," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2001003, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
- DE LA CROIX, David & MAHIEU, Géraldine & RILLAERS, Alexandra, "undated". "How should the allocation of resources adjust to the baby bust?," CORE Discussion Papers RP 1741, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Axel Börsch-Supan & Alexander Ludwig, 2010.
"Old Europe Ages: Reforms and Reform Backlashes,"
in: Demography and the Economy, pages 169-204
National Bureau of Economic Research, Inc.
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