Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/45991
Authors: 
de la Croix, David
Pierrard, Olivier
Sneessens, Henri R.
Year of Publication: 
2010
Series/Report no.: 
Discussion paper series // Forschungsinstitut zur Zukunft der Arbeit 5276
Abstract: 
This paper re-examines 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 advertize 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 changes may seriously bias the evaluation of pension reforms when they have an impact on the equilibrium interest rate.
Subjects: 
overlapping generations
search unemployment
labor force participation
aging
pensions
labor market
JEL: 
E24
H55
J26
J64
Document Type: 
Working Paper

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