Labor Supply And Retirement Policy In An Overlapping Generations Model With Stochastic Fertility

Abstract

The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.

Demographic Transition and Savings Behavior in Mauritius

“…This effect will lead to lower economic growth (Solow, 1956;Lee, 1994;Lee and Mason, 2007;Weil, 1997). Second,increasing life expectancy is the other important component of population aging and will lead to a higher saving rate as people anticipate a longer retirement period to be financed partly by private savings (Jorgensen and Jensen, 2010). These two effects consequently have an offsetting impact on saving and ultimately on growth.…”

Macroeconomic and policy implications of population aging in Brazil

“…The model builds on Jorgensen and Jensen (2010) and features the decisions made by households, firms, and the Brazilian government and the associated economic developments over the life-cycle of a representative agent and firm. Within this demographic-economic framework it is possible to analyze the behavioral and economic implications of population dynamics.…”

“…Clearly, cutting the pension replacement rate by 9 percent is very costly from both a political and social standpoint, but the alternatives may be worse. A pension reform, where adjustments to the age of eligibility to pension benefits, could be considered along with the reduction in the pension replacement rate, since such an indexation mechanism would potentially render the effective labor supply larger and the retirement periods shorter (Jorgensen and Jensen, 2010).…”

“…This effect will lead to lower economic growth (Solow, 1956;Lee, 1994;Lee and Mason, 2007;Weil, 1997). Second, increasing life expectancy is the other important component of population aging and will lead to a higher saving rate as people anticipate a longer retirement period to be financed partly by private saving (Jorgensen and Jensen, 2010). These two effects consequently have an offsetting impact on saving -and thus on growth.…”

“…A possible reform of the relatively generous Brazilian social security system should consider the advantages involved with indexing the age of eligibility to pension benefits (the statutory retirement age) to life expectancy. Such a policy response is analytically formulated by Jorgensen and Jensen (2010) and has informed policy debates particularly across OECD countries. A key driver of the general equilibrium results is endogenous capital accumulation -signifying the second demographic dividend.…”