Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/212053
Authors: 
Kilponen, Juha
Kinnunen, Helvi
Ripatti, Antti
Year of Publication: 
2006
Series/Report no.: 
Bank of Finland Research Discussion Papers No. 28/2006
Abstract: 
This paper extends Gertler's (1999) tractable overlapping generations model with life-cycle features by allowing for distortionary taxation, demographic transition and stochastic variation in demographic structure.The model is then used to study demographic change in the small open economy of Finland. Simulations highlight the key role played by labour market responses to ageing.When the responses of labour supply, wages, and hence private consumption, to higher taxation are consistently accounted for, population ageing has clearly much larger effects on public finance, when compared to mechanical sustainability calculations.Stochastic simulations suggest that lengthening of working time has only a modest alleviating effect on the fiscal burden of ageing.This is due to the fact that stochastic variation in the length of working time has only a relatively small effect on the model's dependency ratio.Variation in life expectancy is clearly much more important.
Subjects: 
ageing
general equilibrium
public finance
demographic uncertainty
JEL: 
E13
H55
J11
J26
Persistent Identifier of the first edition: 
ISBN: 
978-952-462-334-6
Document Type: 
Working Paper

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