51. Retirement, pensions, and ageing
- Author
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Ben J. Heijdra, Ward E. Romp, Research programme EEF, Faculty of Economics and Business, and Macro & International Economics (ASE, FEB)
- Subjects
EARNINGS ,Economics and Econometrics ,Labour economics ,media_common.quotation_subject ,Small open economy ,Overlapping generations model ,Overlapping generations ,jel:F41 ,Pensions ,jel:J26 ,Economics ,health care economics and organizations ,media_common ,Demography ,Consumption (economics) ,jel:D91 ,Pension ,Retirement ,ECONOMICS ,Earnings ,jel:E10 ,retirement, pensions, ageing, demography, Gompertz-Makeham Law of mortality, overlapping generations, small open economy ,CONSUMPTION ,SUBSTITUTION ,jel:H55 ,LIFE-CYCLE ,Interest rate ,MODEL ,Ageing ,EQUILIBRIUM ,REFORM ,jel:J11 ,GROWTH ,population characteristics ,Gompertz–Makeham law of mortality ,Gompertz-Makeham Law of mortality ,human activities ,Finance ,Retirement age ,BEHAVIOR - Abstract
We study the effects of demographic shocks and changes in the pension system on the macroeconomic performance of an advanced small open economy facing a given world interest rate. We construct an overlapping-generations model which includes a realistic description of the mortality process. Individual agents choose their optimal retirement age, taking into account the time- and age profiles of wages, taxes, and the public pension system. The early retirement provision in most pension systems acts as a trap, inducing most workers to retire well before the normal retirement age. Simulations show that pension reform must be drastic for it to have any effects on the retirement behaviour of workers.Keywords: Retirement; Pensions; Ageing; Demography; Gompertz-Makeham Law of mortality; Overlapping generations; Small open economyJEL classification codes: E10; J26; H55; D91; F41; J11
- Published
- 2009
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