Skip to main content
Article thumbnail
Location of Repository

Social security reform and population ageing in a two-sector growth model

By Bas van Groezen, L. Meijdam and H. Verbon


This paper analyses the e¤ects of reducing unfunded social security and population\ud ageing on economic growth and welfare, both for a small open economy\ud and for a closed economy. The economy consists of a service sector and a\ud commodity sector. Productivity growth only occurs in the latter sector and is\ud assumed to depend positively on its size. It is shown that if old agents mainly\ud demand labour intensive services, a decrease of the pay-as-you-go (PAYG) pension\ud scheme reduces long-run growth and thus welfare in a small open economy,\ud whereas current generations are better o¤. However, reducing social security\ud raises productivity growth in a closed economy, both in the short and long run.\ud Furthermore, ageing will lead to a lower long-run rate of economic growth\ud in a small open economy, whereas in the short run, the e¤ects depend on the\ud type of ageing and the size of the PAYG-scheme. In a closed economy, the\ud e¤ects of ageing depend on the substitutability of labour and capital

Topics: Economie, endogenous growth, overlapping generations, pensions, population ageing, privatisation, social security
Year: 2002
OAI identifier:
Download PDF:
Sorry, we are unable to provide the full text but you may find it at the following location(s):
  • (external link)
  • Suggested articles

    To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.