Aging and Pension Reform: Extending the Retirement Age and Human Capital Formation

Edgar Vogel, Alexander Ludwig and Axel Bцrsch-Supan

No 59, Working Paper Series in Economics from University of Cologne, Department of Economics

Abstract: Projected demographic changes in industrialized and developing countries vary in extent and timing but will reduce the share of the population in working age everywhere. Conventional wisdom suggests that this will increase capital intensity with falling rates of return to capital and increasing wages. This decreases welfare for middle aged agents with assets accumulated for retirement. This paper addresses three important adjustments channels to dampen these detrimental effects of ageing: investing abroad, endogenous human capital formation and increasing the retirement age. Although non of these suggestions is new in itself, we examine their effects jointly in one coherent model. Our quantitative finding is that openness has a relatively mild effect. In contrast, endogenous human capital formation in combination with an increase in the retirement age has strong effects. Under these adjustments maximum welfare losses of demographic change for households alive in 2010 are reduced by about 3 percentage points.

Keywords: population aging; human capital; welfare; pension reform; retirement age; open economy (search for similar items in EconPapers)
JEL-codes: C68 E17 E25 J11 J24 (search for similar items in EconPapers)
Date: 2013-02-06
New Economics Papers: this item is included in nep-age, nep-dem, nep-dge and nep-hrm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Related works:
Journal Article: Aging and pension reform: extending the retirement age and human capital formation* (2017)
Working Paper: Aging and Pension Reform: Extending the Retirement Age and Human Capital Formation (2015)
Working Paper: Aging and pension reform: Extending the retirement age and human capital formation (2014)
Working Paper: Aging and Pension Reform: Extending the Retirement Age and Human Capital Formation (2013)
Working Paper: Aging and pension reform: extending the retirement age and human capital formation (2012)
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