Aging and pensions in general equilibrium: Labor market imperfections matter

Arbeitspapier

This paper re-examines the effects of population aging and pension reforms in an OLG model with labor market frictions. The most important feature brought about by labor market frictions is the connection between the interest rate and the unemployment rate. Exogenous shocks (such as aging) leading to lower interest rates also imply lower equilibrium unemployment rates, because lower capital costs stimulate labor demand and induce firms to advertize more vacancies. These effects may be reinforced by increases in the participation rate of older workers, induced by the higher wage rates and the larger probability of finding a job. These results imply that neglecting labor market frictions and employment rate changes may seriously bias the evaluation of pension reforms when they have an impact on the equilibrium interest rate.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 5276

Classification and Topics

• Classification: Wirtschaft ; Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity ; Social Security and Public Pensions ; Retirement; Retirement Policies ; Unemployment: Models, Duration, Incidence, and Job Search
• Subject: overlapping generations ; search unemployment ; labor force participation ; aging ; pensions ; labor market

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): de la Croix, David ; Pierrard, Olivier ; Sneessens, Henri R.
• Event: Veröffentlichung
• (who): Institute for the Study of Labor (IZA)
• (where): Bonn
• (when): 2010

Further information

• Handle: http://hdl.handle.net/10419/45991
• Last update: 10.03.2025, 11:46 AM CET