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Education, demographics, and the economy
Journal
Journal of Pension Economics and Finance
ISSN
1474-7472
ISSN-Digital
1475-3022
Type
journal article
Date Issued
2009-04-01
Author(s)
Abstract
This paper deals with two issues concerning the effects of population
aging on education decisions in the presence of a PAYG pension
system: We first analyze the effects of an aging population per se on
individual skill choices and continuous education and the production
structure. Second, we study the implications of postponed retirement, which is often proposed as a measure to cope with the economic challenges of increased longevity. Our study uses a dynamic general equilibrium framework with overlapping generations and probabilistic aging. The model allows for capital-skill complementarity in the production of final output. As a response to population aging, in a small open economy with a fixed interest rate, our first simulation shows that GDP is depressed due to an adverse effect on skill choice and labor supply. We then introduce postponed retirement as a potentially dampening policy measure due to its encouragement of human capital formation. However, since there is less private saving in this scenario, the overall effect on GDP is even worse than in the pure aging scenario
aging on education decisions in the presence of a PAYG pension
system: We first analyze the effects of an aging population per se on
individual skill choices and continuous education and the production
structure. Second, we study the implications of postponed retirement, which is often proposed as a measure to cope with the economic challenges of increased longevity. Our study uses a dynamic general equilibrium framework with overlapping generations and probabilistic aging. The model allows for capital-skill complementarity in the production of final output. As a response to population aging, in a small open economy with a fixed interest rate, our first simulation shows that GDP is depressed due to an adverse effect on skill choice and labor supply. We then introduce postponed retirement as a potentially dampening policy measure due to its encouragement of human capital formation. However, since there is less private saving in this scenario, the overall effect on GDP is even worse than in the pure aging scenario
Language
English
Keywords
Education
Human Capital
Demographics
Aging
HSG Classification
contribution to scientific community
Refereed
Yes
Publisher
Cambridge Univ. Press
Publisher place
Cambridge
Volume
8
Number
2
Start page
189
End page
223
Pages
35
Subject(s)
Division(s)
Eprints ID
22436
File(s)