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The labor market effect of demographic change: Alleviation for financing social security

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  • Friese, Max

Abstract

The paper shows the effect of demographic change on per capita burden of financing a PAYG social security system in the standard OLG model with a frictional labor market. Rising longevity and decreasing fertility both induce a rise in the employment level via increased capital accumulation and job openings. Simulations of the theoretical model show that this labor market effect indirectly crowds out part of the initial demographic shock's direct impact on per capita financing burden. This holds true for the generation at the period of impact as well as for the following generations.

Suggested Citation

  • Friese, Max, 2016. "The labor market effect of demographic change: Alleviation for financing social security," VfS Annual Conference 2016 (Augsburg): Demographic Change 145808, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc16:145808
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    References listed on IDEAS

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    1. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, December.
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    6. de la Croix, David & Pierrard, Olivier & Sneessens, Henri R., 2013. "Aging and pensions in general equilibrium: Labor market imperfections matter," Journal of Economic Dynamics and Control, Elsevier, vol. 37(1), pages 104-124.
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    Cited by:

    1. Xiaomeng Zhang & Theodore Palivos & Xiangbo Liu, 2022. "Aging and automation in economies with search frictions," Journal of Population Economics, Springer;European Society for Population Economics, vol. 35(2), pages 621-642, April.

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    More about this item

    JEL classification:

    • 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
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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