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Longevity Shocks with Age-Dependent Productivity Growth

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  • Ben J. Heijdra
  • Laurie S. M. Reijnders

Abstract

The aim of this paper is to study the long-run effects of a longevity increase on individual decisions about education and retirement, taking macroeconomic repercussions through endogenous factor prices and the pension system into account. We build a model of a closed economy inhabited by overlapping generations of finitely-lived individuals whose labour productivity depends on their age through the build-up of labour market experience and the depreciation of human capital. We make two contributions to the literature on the macroeconomics of population ageing. First we show that it is important to recognize that a longer life need not imply a more productive life and that this matters for the affordability of an unfunded pension system. Second, we find that factor prices could move in a direction opposite to the one accepted as conventional wisdom following an increase in longevity, depending on the corresponding change in the age-productivity profile.

Suggested Citation

  • Ben J. Heijdra & Laurie S. M. Reijnders, 2015. "Longevity Shocks with Age-Dependent Productivity Growth," CESifo Working Paper Series 5364, CESifo.
    • Handle: RePEc:ces:ceswps:_5364
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    References listed on IDEAS

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    15. Ben J. Heijdra & Jochen O. Mierau & Laurie S. M. Reijnders, 2010. "The Tragedy of Annuitization," CESifo Working Paper Series 3141, CESifo.
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    20. Heijdra, Ben J. & Mierau, Jochen O. & Reijnders, S. M., 2014. "A Tragedy Of Annuitization? Longevity Insurance In General Equilibrium," Macroeconomic Dynamics, Cambridge University Press, vol. 18(7), pages 1607-1634, October.
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    Cited by:

    1. Willem DEVRIENDT & Freddy HEYLEN, 2020. "Macroeconomic and Distributional Effects of Demographic Change in an Open Economy - The Case of Belgium," JODE - Journal of Demographic Economics, Cambridge University Press, vol. 86(1), pages 87-124, March.
    2. Arthur Jacobs & Freddy Heylen, 2021. "Demographic change, secular stagnation and inequality: automation as a blessing?," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 21/1030, Ghent University, Faculty of Economics and Business Administration.
    3. Ben J. Heijdra & Laurie S. M. Reijnders, 2016. "Human Capital Accumulation and the Macroeconomy in an Ageing Society," De Economist, Springer, vol. 164(3), pages 297-334, September.
    4. Ho, Calvin K. & McAuley, Kimberley B. & Peppley, Brant A., 2019. "Biolubricants through renewable hydrocarbons: A perspective for new opportunities," Renewable and Sustainable Energy Reviews, Elsevier, vol. 113(C), pages 1-1.
    5. Khan, Asif & Asad, Mohammad Waqar Ali, 2019. "A method for optimal cut-off grade policy in open pit mining operations under uncertain supply," Resources Policy, Elsevier, vol. 60(C), pages 178-184.
    6. Manuel Guerra & João Pereira & Miguel St. Aubyn, 2018. "Life cycles with Endogenous Time Allocation and Age-Dependent Mortality," Working Papers REM 2018/56, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.
    7. Emerson Patrick M. & Knabb Shawn D., 2020. "Education Spending, Fertility Shocks and Generational Consumption Risk," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 20(2), pages 1-26, June.

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    More about this item

    Keywords

    demography; education; retirement; human capital;
    All these keywords.

    JEL classification:

    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • I25 - Health, Education, and Welfare - - Education - - - Education and Economic Development
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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