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Education, Demographics, and the Economy

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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
   
type journal paper
   
keywords Education, Human Capital, Demographics, Aging
   
project Education, Training, and Labor Market Search
language English
kind of paper journal article
date of appearance 1-9-2009
journal Journal of Pension Economics and Finance
publisher Cambridge Journals
volume of journal 8
number of issue 2
page(s) 189-223
review double-blind review
   
citation Jaag, C. (2009). Education, Demographics, and the Economy. Journal of Pension Economics and Finance, 8(2), 189-223.