Old folks and spoiled brats : Why the baby boomers' saving crisis need not be that bad
Series
Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP)
Type
working paper
Date Issued
2001
Author(s)
Abstract
We study the impact of an anticipated "baby boom" in an overlapping generations economy. The rise of the working population lowers the wage, and the high demand for assets causes a rise in the price of capital which will be reversed when the baby boomers leave the work-force. However, the swings in factor prices are substantially dampened if we allow for more than two generations, endogenous labor supply, and convex capital adjustment costs. This is mainly due to the intertemporal shifts in labor market participation that can be observed if agents work for more than one period. Optimal saving and labor supply decisions of the baby boomers' preceding and subsequent generations partly offset the impact of the unfavorable demographic shock. Accordingly, the impact of a baby boom on the welfare of different generations crucially depends on the elasticity of labor supply.
Language
English
Keywords
baby boom
asset prices
labour market adjustments
HSG Classification
contribution to scientific community
Refereed
No
Publisher
deep Cahiers de Recherches Economiques
Number
01.07
Subject(s)
Eprints ID
43718