Thursday, 19. October 2017
Miguel Sanchez-Romero and Alexia Fürnkranz-Prskawetz investigate the differential impact that pension systems have on the labor supply and the accumulation of physical and human capital for individuals that differ by their learning ability and levels of life expectancy. Using a general equilibrium model populated by overlapping generations, in which all population groups interact through the pension system, the labor market, and the capital market, they show that the increasing gap in life expectancy by socioeconomic status makes the US pension system progressively more regressive and explains the increasing per capita income gap across ability groups.
Sanchez-Romero, M., Prskawetz, A. (2017). Redistributive effects of the US pension system among individuals with different life expectancy. The Journal of the Economics of Ageing 10, 51-74. https://doi.org/10.1016/j.jeoa.2017.10.002
From 1850 to 2000, in Western European countries life expectancy rose from 30–40 to 80years and the average number of children per woman fell from 4 to 5 children to slightly more than one. To gauge the economic consequences of these demographic trends, we implement an overlapping generations model with hetero- geneity by level of education in which individuals optimally decide their consumption of market- and home-produced goods as well as the time spent on paid and unpaid work. We find that around 17% of the observed increase in per-capita income growth from 1850 to 2000 was due to the demographic transition. Around 50% of the demographic contribution is explained by the increase in the average productivity per worker (productivity component), which arises from the change in the population’s age struc- ture and the rise in households’ saving rate. The remaining 50% is explained by the higher growth rate of workers relative to the total population (translation component).
Sánchez-Romero, M., Abio, G., Patxot, C., Souto, G. (2017). Contribution of demography to economic growth. SERIEs The Journal of the Spanish Economic Association. https://doi.org/10.1007/s13209-017-0164-y