Longevity shocks with age-dependent productivity growth

Ben J. Heijdra*, Laurie S.M. Reijnders

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

3 Citations (Scopus)

Abstract

The aim of this paper is to study the long-run effects of a longevity increase on individual decisions about education and retirement, taking macroeconomic repercussions through endogenous factor prices and the pension system into account. We build a model of a closed economy inhabited by overlapping generations of finitely-lived individuals whose labour productivity depends on their age through the build-up of labour market experience and the depreciation of human capital. We make two contributions to the literature on the macroeconomics of population ageing. First, we show that it is important to recognize that a longer life need not imply a more productive life and that this matters for the affordability of an unfunded pension system. Second, we find that factor prices could move in a direction opposite to the one accepted as conventional wisdom following an increase in longevity, if this increase is accompanied by a sufficient decline in the rate of human capital depreciation.

Original languageEnglish
Pages (from-to)200-230
Number of pages31
JournalJournal of Pension Economics and Finance
Volume17
Issue number2
DOIs
Publication statusPublished - Apr-2018

Keywords

  • Ageing
  • retirement
  • human capital
  • pensions
  • HUMAN-CAPITAL ACCUMULATION
  • LIFE EXPECTANCY
  • RETIREMENT
  • TRENDS
  • LABOR

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