Aging and Pensions in General Equilibrium: Labour Market Imperfections Matter

de la Croix, David; Pierrard, Olivier; Sneessens, Henri

Reference : Aging and Pensions in General Equilibrium: Labour Market Imperfections Matter


	Document type :	Scientific journals : Article
	Discipline(s) :	Business & economic sciences : Macroeconomics & monetary economics
	To cite this reference:	http://hdl.handle.net/10993/5468

Title :	Aging and Pensions in General Equilibrium: Labour Market Imperfections Matter
Language :	English
Author, co-author :	de la Croix, David [Université Catholique de Louvain - UCL > IRES - Institut de recherches économiques et sociales]
	Pierrard, Olivier [BCL - Banque centrale du Luxembourg]
	Sneessens, Henri [University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Center for Research in Economic Analysis (CREA) > ; Université Catholique de Louvain - UCL > IRES - Institut de rechercehs économiques et sociales]
Publication date :	2013
Journal title :	Journal of Economic Dynamics and Control
Publisher :	Elsevier Science
Volume :	37
Pages :	104-124
Peer reviewed :	Yes (verified by ORBi^lu)
Audience :	International
ISSN :	0165-1889
Keywords :	[en] Overlapping Generations ; Search Unemployment ; Labor Force Participation ; aging ; pensions ; labor market
Abstract :	[en] We re-examine the effects of population aging and pension reforms in an OLG model with labor market frictions. The most important feature brought about by labor market frictions is the connection between the interest rate and the unemployment rate. Exogenous shocks (such as aging) leading to lower interest rates also imply lower equilibrium unemployment rates, because lower capital costs stimulate labor demand and induce firms to advertise more vacancies. These effects may be reinforced by increases in the participation rate of older workers, induced by the higher wage rates and the larger probability of finding a job. These results imply that neglecting labor market frictions and employment rate dynamics may seriously bias the evaluation of pension reforms when they have an impact on the equilibrium interest rate.
Target :	Researchers
Permalink :	http://hdl.handle.net/10993/5468
Other URL :	http://www.journals.elsevier.com/journal-of-economic-dynamics-and-control/

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