The Impact of Reducing the Pension Generosity on Inequality and Schooling

We investigate the impact of a reduction in the pension replacement rate on the schooling choice and on inequality in an overlapping generations model in which individuals differ by their life expectancy and in their cost of attending schooling. Within our framework we illustrate that many pension systems are ex ante regressive due to the difference in life expectancy across skill groups. We then derive the level of progressivity that needs to be implemented to restore an equal treatment of the pension system across skill groups

Persistent Unstable Equilibria in Wonderland

Models of the interactions between population, economy, and environment often contain nonlinear functional relationships and variables that vary at different speeds. These properties foster apparent unpredictabilities in system behavior. Using a simple deterministic model of demographic, economic and environmental interactions, we illustrate the usefulness of geometric singular perturbation theory and local bifurcation theory. In particular we show how it is possible to obtain analytic expressions for: (1) the level of emissions above which environmental deterioration begins, (2) the time it takes from reaching the critical level of emissions to the beginning of rapid environmental deterioration, and (3) the level of emissions at the time that rapid deterioration begins. Because our results are analytic, they make the outcomes of demographic, economic, and environmental interactions more predictable, and, therefore, potentially more manageable

Decomposing the change in labour force indicators over time

In this paper we study changes in the size and the composition of the labour force in five OECD countries from 1983 through 2000. We apply a recent decomposition method to quantify the components of the change over time in the crude labour force rate and the mean age of the labour force. Our results show that the change in the crude labour force rate was dominated by the change in age-specific labour force participation rates. For the mean age of the labour force we find that for males the change in the age composition of the population predominately explains the overall change while the results for females are less clear-cut

Education, lifetime labor supply, and longevity improvements

This paper presents an analysis of the differential role of mortality for the optimal schooling and retirement age when the accumulation of human capital follows the so-called “Ben-Porath mechanism”. We set up a life-cycle model of consumption and labor supply at the extensive margin that allows for endogenous human capital formation. This paper makes two important contributions. First, we provide the conditions under which a decrease in mortality leads to a longer education period and an earlier retirement age. Second, those conditions are decomposed into a Ben-Porath mechanism and a lifetime-human wealth effect vs. the years-to-consume effect. Finally, using US and Swedish data for cohorts born between 1890 and 2000, we show that our model can match the empirical evidence

Quantifying Economic Dependency

In this paper we compare several types of economic dependency ratios for a selection of European countries. These dependency ratios take into account not only the demographic structure of the population, but also the differences in age-specific economic behaviour such as labour market activity, income and consumption as well as age-specific public transfers. In selected simulations where we combine patterns of age-specific economic behaviour and transfers with population projections, we show that in all countries population ageing would lead to a pronounced increase in dependency ratios if present age-specific patterns were not to change. Our analysis of cross-country differences in economic dependency demonstrates that these differences are driven by both differences in age-specific economic behaviour and in the age composition of the populations. The choice of which dependency ratio to use in a specific policy context is determined by the nature of the question to be answered. The comparison of our various dependency ratios across countries gives insights into which strategies might be effective in mitigating the expected increase in economic dependency due to demographic change

Optimal investment and location decisions of a firm in a flood risk area using impulse control theory

Flooding events can affect businesses close to rivers, lakes or coasts. This paper provides an economic partial equilibrium model, which helps to understand the optimal location choice for a firm in flood risk areas and its investment strategies. How often, when and how much are firms willing to invest in flood risk protection measures? We apply Impulse Control Theory and develop a continuation algorithm to solve the model numerically. We find that, the higher the flood risk and the more the firm values the future, i.e. the more sustainable the firm plans, the more the firm will invest in flood defense. Investments in productive capital follow a similar path. Hence, planning in a sustainable way leads to economic growth. Sociohydrological feedbacks are crucial for the location choice of the firm, whereas different economic settings have an impact on investment strategies. If flood defense is already present, e.g. built up by the government, firms move closer to the water and invest less in flood defense, which allows firms to generate higher expected profits. Firms with a large initial productive capital surprisingly try not to keep their market advantage, but rather reduce flood risk by reducing exposed productive capital

Population Aging and Future Carbon Emissions in the United States

Changes in the age composition of U.S. households over the next several decades could affect energy use and carbon dioxide emissions. this article incorporates population age structure into and energy-economic growth model with multiple dynasties of heterogenous households. The model is used to estimate and compare effects of population aging and technical change on baseline paths of U.S. energy use and emissions. Results show that population aging reduces long-term carbon dioxide emissions, by almost 40% in low population scenario, and effects of aging on emissions can be as large, or larger than effects of technical change in some cases

Measuring private transfers between generations and gender: an application of national transfer accounts for Austria 2015

Few data sources provide information on private transfers between generations and gender. We use a novel approach based on the National Transfer Accounts methodology to estimate the value of intra-family transfers between generations by age, gender and parental status in Austria 2015. The paper considers monetary transfers together with transfers of consumption goods and transfers of services produced by non-market work. Our results show that parents use one third of their disposable income and up to four hours of daily non-market work for their children. The total size of the intra-family transfers corresponds to 38 per cent of primary income

Endogenous Growth of Population and Income Depending on Resource and Knowledge

We consider a three sector demoeconomic model and its interdependence with the accumulation of human capital and resources. The primary sector harvests a renewable resource (fish, corn or wood) which constitutes the input into industrial production, the secondary sector of our economy. Both sectors are always affected by the stock of knowledge. The tertiary sector (schooling, teaching, training, research) is responsible for the accumulation of this stock that represents a public good for all three sectors. Labor is divided up between the three sectors under the assumption of competitive labor markets. A crucial feature of this economy is the importance of public goods--stock of knowledge and the common--which requires collective actions. Absence of collective actions describes the limiting case of hunters and gatherers. The central focus of this study is whether and what kind of interactions between the economy, the population and the environment foster sustainability and, if possible, continuous growth