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Health, Longevity and Pension Reform

Author

Listed:
  • Laun, Tobias

    (Department of Economics)

  • Markussen, Simen

    (Ragnar Frisch Centre for Economic Research)

  • Vigtel, Trond Christian

    (Ragnar Frisch Centre for Economic Research)

  • Wallenius, Johanna

    (Department of Economics, Stockholm School of Economics,)

Abstract

In this paper, we study alternative pension reforms designed to achieve fiscal sustainability in the face of demographic change. We are particularly interested in the heterogeneous effects across demographic groups, as improvements in health and longevity have not been uniform across the population. To this end, we develop a dynamic, structural life cycle model of heterogeneous agents who face health, mortality and income risk. We consider the following policy reform measures: (1) increasing the early access age to pensions, (2) raising income taxes, (3) lowering pension benefits and (4) lowering pension and disability benefits. We find that, of the considered policies, proportionally lowering pension and disability benefits results in the highest average welfare and the lowest degree of inequality. It is also successful at boosting employment, particularly among the less educated.

Suggested Citation

  • Laun, Tobias & Markussen, Simen & Vigtel, Trond Christian & Wallenius, Johanna, 2018. "Health, Longevity and Pension Reform," Working Paper Series 2018:9, Uppsala University, Department of Economics.
    • Handle: RePEc:hhs:uunewp:2018_009
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    References listed on IDEAS

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    More about this item

    Keywords

    Life cycle; Retirement; Disability insurance; Health;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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