Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/212112 
Authors: 
Year of Publication: 
2008
Series/Report no.: 
Bank of Finland Research Discussion Papers No. 21/2008
Publisher: 
Bank of Finland, Helsinki
Abstract: 
This paper investigates public pension funding using a dynamic general equilibrium macroeconomic model (DSGE) that facilitates investigation of distortionary effects of fiscal and pension policy responses to ageing. The model is calibrated to the Finnish economy, which will encounter substantial ageing pressures in the near future. During the transition to an older population structure ageing costs can be substantially lowered by allowing public funds to smooth out the tax responses. Cutting down on pension prefunding at a time when the pace of ageing is at its peak reduces the necessary tax hikes and stimulates labour supply growth at the moment when the labour market is tightest. With smaller funding needs, ageing leads to a slower growth in labour costs, a better employment conditions and faster production growth.
Subjects: 
ageing
general equilibrium
public finance
government funds
JEL: 
E13
H55
J11
J26
Persistent Identifier of the first edition: 
ISBN: 
978-952-462-459-6
Document Type: 
Working Paper

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