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Living Standards in an Aging Germany: The Benefits of Reforms and the Costs of Resistance

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  • Börsch-Supan Axel

    (Ph.D., MEA, University of Mannheim, 68131 Mannheim, Germany)

  • Ludwig Alexander

    (Ludwig, MEA, University of Mannheim, 68131 Mannheim, Germany)

Abstract

The extent of the demographic change in Europe and especially Germany is dramatic and will deeply affect future labor, financial and goods markets. The expected strain on public budgets and especially social security has received prominent attention, but aging poses many other economic challenges that threaten growth and living standards if they remain unaddressed.This paper investigates the potential benefits of pension and labor market reform for growth and living standards, taking into account behavioral reactions to specific reforms. Which behavioral reactions will strengthen, which will weaken reform policies? While Germany has a large unfunded pension system and vulnerable labor markets, Germans show remarkable resistance against pension and labor market reform. Can Germany maintain its standard of living even if behavioral reactions offset some of the current reform efforts? The paper uses a novel modeling approach to distinguish between exogenous and endogenous components of labor supply in order to shed light on these questions.

Suggested Citation

  • Börsch-Supan Axel & Ludwig Alexander, 2009. "Living Standards in an Aging Germany: The Benefits of Reforms and the Costs of Resistance," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 229(2-3), pages 163-179, April.
    • Handle: RePEc:jns:jbstat:v:229:y:2009:i:2-3:p:163-179
    DOI: 10.1515/jbnst-2009-2-306
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    1. Vogel, Edgar & Ludwig, Alexander & Börsch-Supan, Axel, 2017. "Aging and pension reform: extending the retirement age and human capital formation," Journal of Pension Economics and Finance, Cambridge University Press, vol. 16(1), pages 81-107, January.
    2. repec:mea:meawpa:12257 is not listed on IDEAS
    3. Schön, Matthias, 2020. "Demographic change and the rate of return in PAYG pension systems," Discussion Papers 57/2020, Deutsche Bundesbank.
    4. Schön, Matthias, 2020. "Long-term outlook for the German statutory pension system," Discussion Papers 22/2020, Deutsche Bundesbank.

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