Aging and pension reform: extending the retirement age and human capital formation

Arbeitspapier

Projected demographic changes in industrialized countries will reduce the share of the working-age population. Analyses based on standard OLG models predict that these changes will increase the capital- labor ratio. Hence, rates of return to capital decrease and wages increase with adverse welfare consequences for current middle aged asset rich agents. This paper addresses three important adjustments channels to dampen these detrimental effects of demographic change: investing abroad, endogenous human capital formation and increasing the retirement age. Our quantitative finding is that openness has a relatively mild effect. In contrast, endogenous human capital formation in combination with an increase in the retirement age has strong effects. Under these adjustments maximum welfare losses of demographic change for households alive in 2010 are reduced by about 3 percentage points.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ECB Working Paper ; No. 1476

Classification and Topics

• Classification: Wirtschaft ; Computable General Equilibrium Models ; General Aggregative Models: Forecasting and Simulation: Models and Applications ; Aggregate Factor Income Distribution ; Demographic Trends, Macroeconomic Effects, and Forecasts ; Human Capital; Skills; Occupational Choice; Labor Productivity
• Subject: Human capital ; open economy ; pension reform ; Population aging ; retirement age ; Welfare

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Vogel, Edgar ; Ludwig, Alexander ; Börsch-Supan, Axel
• Event: Veröffentlichung
• (who): European Central Bank (ECB)
• (where): Frankfurt a. M.
• (when): 2012

Further information

• Handle: http://hdl.handle.net/10419/153909
• Last update: 10.03.2025, 11:45 AM CET