|
on Economics of Ageing |
| By: | Ottmer, Henning (IFAU - Institute for Evaluation of Labour Market and Education Policy) |
| Abstract: | This paper examines a 1976 Swedish reform that lowered the normal retirement age (NRA) for public pensions from 67 to 65. The reform implied substantial increases in future pension benefits while leaving contribution rules unchanged. Using administrative data, I find sharp behavioral responses: employment at age 66 fell by 17 percentage points, or 47 percent relative to pre-reform levels, with little effect above the new NRA and modest effects below it. Exploiting variation across occupational pension schemes and reform timing, I use a set of back-of-the-envelope calculations to assess the relative importance of different mechanisms. The patterns are most consistent with behavioral responses and social norms playing a central role, while wealth effects appear to explain roughly one-fifth of the decline. I also provide suggestive evidence on employer-side factors, including automatic termination rules. The reform targeted an older age group than is typical in the literature on retirement ages, at a time when health and work capacity were more limited than today, making the findings relevant for contemporary policy settings in which increases in statutory retirement ages extend to older age. |
| Keywords: | Retirement; Retirement Policies; Social Security; Public Pensions |
| JEL: | H55 J26 |
| Date: | 2026–06–03 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:ifauwp:2026_013 |
| By: | Zhorin, Victor |
| Abstract: | Heterogeneous-agent macroeconomics has reformed the income and wealth sides of the household problem. The HANK program established that aggregate dynamics require the cross-sectional distribution of marginal propensities to consume, balance-sheet exposures, and permanent income. Every model in this program inherits, without examination, a smooth actuarial mortality hazard calibrated to population life tables. This is the last unreformed input, and it is structurally wrong. The expected residual life of an agent is a value function defined on a manifold whose boundary is death. That function has a geometric property rarely stated in the economic literature: its curvature diverges at a specific power law rate as the agent approaches the boundary. Every lifecycle model that represents mortality as a smooth hazard imposes a bounded-curvature approximation on a function whose curvature is unbounded. No function in the smooth hazard class can encode the shock structure of catastrophic diagnoses that dominate individual mortality trajectories near the boundary, regardless of how many parameters the hazard contains. We establish three structural consequences. First, the population-level response to symmetric interventions is asymmetric: the worsening direction systematically exceeds the improving direction by a factor governed by a single cross-sectional moment, the covariance between boundary curvature and intervention exposure. Second, this covariance is not a small correction in clinical settings: unlike the borrowing-constraint analog in macroeconomics, where the boundary binds for a minority of agents, the mortality boundary is universal, and the population-level curvature integral diverges in a way the macroeconomic scaling intuition cannot accommodate. Third, the representation class that correctly encodes the boundary geometry exists: trained networks with piecewise-linear activation produce value functions that are exactly tropical polynomials in the max-plus semiring, with the density of the piecewise structure near the boundary encoding the curvature divergence that smooth functions cannot. A constellation of puzzles that the lifecycle literature has documented and not resolved, covering wealth decumulation, bequest dispersion, annuitization, retirement timing, portfolio composition, health expenditure at end of life, long-term care insurance, Social Security claiming, and pension tax choices. These are projections of a single geometric fact. Correcting the mortality input generates each of them as equilibrium properties of the model rather than as calibrated parameters or behavioral anomalies. |
| Keywords: | lifecycle models; heterogeneous agents; mortality; absorbing boundaries; tropical geometry; sufficient statistics; bequest motives; annuity puzzle; retirement; portfolio choice; health expenditure |
| JEL: | C14 E21 G11 G22 H55 I10 |
| Date: | 2026–05–15 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:129315 |
| By: | Nicholas-James Clavet; Pierre-Carl Michaud; Julien Navaux |
| Abstract: | We analyze the optimal provision and insurance of long-term care in a context where preferences and risks vary across individuals. We combine a survey experiment conducted with 3, 002 people aged 55 to 69 in Quebec with Quebec administrative data on care needs profiles, service provision, and health transitions. Our results suggest that an optimal scheme would reduce co-insurance for institutional care, increase it for home care, and lead to a constrained expansion of home care services. Compared with the current system in Quebec, such a reform would increase the use of home care, triple public spending, and generate a substantial gain in welfare, while highlighting the central role of capacity and labour constraints in the organization of long-term care. Nous analysons l’organisation et l’assurance optimales des soins de longue durée dans un contexte où les préférences et les risques varient d’une personne à l’autre. Nous combinons une expérience de sondage menée auprès de 3 002 personnes âgées de 55 à 69 ans au Québec à des données administratives québécoises sur les profils de besoins, l’offre de services et les transitions de santé. Nos résultats suggèrent qu’un régime optimal réduirait la coassurance en hébergement, l’augmenterait en soins à domicile et entraînerait une expansion contrainte des services à domicile. Par rapport au système actuel au Québec, une telle réforme accroîtrait le recours aux soins à domicile, triplerait les dépenses publiques et générerait un gain important de bien-être pour la population, tout en mettant en évidence le rôle central des contraintes de capacité et de main-d’œuvre dans l’organisation des soins de longue durée. |
| Keywords: | long-term care, insurance, preferences, risk, supply constraints, soins de longue durée, assurance, préférences, risque, contraintes liées à l'offre |
| JEL: | H51 I18 J14 J26 |
| Date: | 2026–06–11 |
| URL: | https://d.repec.org/n?u=RePEc:cir:cirwor:2026s-10 |
| By: | Wabenga, James Yango; Moran, Kevin |
| Abstract: | This paper develops a two-country, open-economy quantitative model to analyze the macroeconomic implications of demographic shifts, including population aging, declining population growth rates, increased longevity, and international migration. The model builds on the overlapping generations (OLG) framework of Gertler (1999), incorporating both young and old households in each country. Entry (population growth), retirement, and exit (death) rates are calibrated to match observed demographic patterns, such as population growth rates, average retirement ages, and life expectancy. The model accommodates various demographic scenarios-such as differential population growth across countries and migration from developing to developed economies-as well as economic scenarios, including divergent productivity levels and imperfect global financial integration. As such, it provides a valuable quantitative tool for policy analysis on these issues. The model’s capabilities are demonstrated through simulations of key demographic and economic scenarios, focusing primarily on how population aging, international migration, and productivity differences affect external balances (net exports and the current account) in two regions, seen as the global North and the global South. The findings highlight the importance of demographic trends as a main factor influencing overall savings and external balances. Specifically, demographic shocks lead to trade and current account surpluses in the North, while productivity differences shape investment patterns across regions. The results indicate that, over time, an aging economy like the global North is likely to run a trade deficit, save more, have a favorable net external position, and maintain a current account surplus. |
| Keywords: | Open economy macroeconomics; Current account balance; Trade balance; International migration; Financial markets; Demographic trends |
| JEL: | E21 E44 E62 F22 F32 F41 J11 |
| Date: | 2024–10–03 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:129082 |
| By: | Wabenga, James Yango; Moran, Kevin |
| Abstract: | This paper presents an empirical analysis of the impacts of global demographic changes and international migration on external balances. It categorizes countries into advanced, emerging, and developing economies and conducts the analysis region by region. The results are obtained from panel models that estimate the impact of demographic trends on macroeconomic aggregates. This analysis is conducted region by region, examining one demographic factor (such as aging, fertility, life expectancy, or immigration) and one macroeconomic aggregate (consumption, savings, investment, trade balance, or current account balance) at a time. The results notably report that larger proportions of older adults have a detrimental effect on the trade balance in advanced and merging economies. Additionally, aging in emerging and developing economies is associated with lower savings rates and current account balance to GDP ratio, while in advanced economies, savings rates tend to rise with life expectancy, aging, and net migration. The results suggest that the trade balance is positively associated with the change in the working-age population share in advanced economies, while it is mostly negatively associated with the trade balance in emerging economies. Changes in life expectancy have a negative impact on the trade balance in both advanced and emerging economies. Finally, net immigration increases saving rates in advanced economies and investment in emerging and developing economies. This paper highlights the importance of regional conditioning when examining how demographic trends affect economic decisions, consumption, investment, labour markets, external balances, and public policy. Regional analyses of the effects of demographic changes on the macroeconomy are essential. Although all regions face demographic changes, their scale varies. Therefore, this paper examines the impact of demographic factors on the macroeconomic performance of each region. |
| Keywords: | Demographic trends; International migration; Consumption; Savings; Investment; Trade balance; Current account. |
| JEL: | E21 E22 F16 F22 F32 F41 J11 J21 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:129084 |
| By: | Kwon, Junghyun |
| Abstract: | Operating beyond the super-aged threshold, Korea faces deepening shortages in its eldercare workforce as the sector struggles to attract workers. While better job quality is imperative to expand this workforce and maintain the quality of life for older adults, incentives for domestic workers alone will not close the gap. Visa policy needs to change to bring in foreign care workers, and care robot technologies should be actively deployed to raise labor productivity in the sector. |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:kdifoc:341385 |
| By: | Hyeun Seok Kim (Korea Institute for Industrial Economics and Trade) |
| Abstract: | This study investigates the substitutability and complementarity between digital capital and labor in the context of an aging workforce in South Korea, focusing on information and communications technology (ICT) capital. ICT capital encompasses both tangible and intangible assets that facilitate digital transformation (DX), and firms in every sector of the economy have rapidly accumulated this kind of capital. Digitalization has never been more intense than it is now, and this makes it essential to assess whether labor is complemented or substituted by such capital. Using a multi-product joint cost function, we estimate cross-price elasticities among ICT capital, non-ICT capital, and two groups of labor: older and younger workers.<p> The empirical results indicate that ICT capital substitutes for older workers, though the magnitude of this effect has weakened over time. In contrast, the substitutability between ICT capital and younger workers is statistically insignificant. Furthermore, non-ICT capital generally complements both age groups in the labor force. These findings carry major implications for policy, and can help inform measures designed to facilitate DX in industries with aging demographics. |
| Keywords: | demographics; population aging; demographic change; labor; labor force dynamics; digital capital; labor force analysis; labor economics; digital transformation; DX; aging |
| JEL: | J11 J18 J24 J28 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ris:kieter:022848 |
| By: | Witnie Compere; Bertrand Achou; Philippe De Donder; Raquel Fonseca; Franca Glenzer; Minjoon Lee; Marie-Louise Leroux |
| Abstract: | Ce papier examine les principaux déterminants socio-économiques et démographiques susceptibles d’influencer la d´ecision des individus d’offrir des soins de longue durée à leurs parents. Pour ce faire, nous nous appuyons sur des données originales issues d’une enquête menée en 2023 auprès de 2300 personnes résidant au Québec et en Ontario, âgées de 45 à 58 ans. Nous analysons successivement trois dimensions de la décision d’aide anticipée (le choix du bénéficiaire potentiel, le type de soins et l’intensité hebdomadaire envisagés) afin de saisir la complexité du processus décisionnel en amont de l’engagement dans l’aide informelle. Nous montrons que ces déterminants reposent sur des arbitrages distincts. Le choix de mode de prise en charge est principalement structuré par les contraintes organisationnelles (selon que l’aidant travaille à temps plein ou non) et la charge anticipée (selon l’espérance de vie du proche aidé), tandis que l’intensité d’aide envisagée d´epend de norme de genre, des contraintes de temps (notamment liées à l’emploi à temps plein et au départ à la retraite), de l’état de santé perçu du proche et de la relation de filiation. Cette hétérogénéité souligne que la volonté d’aider ne relève ni d’une logique purement affective ni d’un calcul strictement économique. |
| Keywords: | Dépendance, perte d’autonomie, aide formelle et informelle. |
| JEL: | D14 E21 G51 I10 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:rsi:irersi:23 |
| By: | Andrea Molent |
| Abstract: | This paper develops a valuation framework for guaranteed lifetime withdrawal benefit (GLWB) contracts with long-term care (LTC) features when the reference fund follows exponential Levy dynamics and the short rate follows the Hull-White model. The contract combines financial guarantees, longevity protection, health-contingent LTC payments, and surrender optionality, requiring the joint treatment of jump risk, stochastic discounting, and disability risk. The numerical method couples a recombining Hull-White trinomial tree with an implicit-explicit (IMEX) finite difference scheme. The framework incorporates a seven-state health model, annual fees, LTC payments, guaranteed withdrawals, and bang-bang policyholder actions, and is benchmarked against Monte Carlo simulation. Numerical results show that the hybrid tree-IMEX method delivers stable long-maturity prices consistent with simulation benchmarks. They also show that Levy equity dynamics and stochastic interest rates have a material impact on fair fees and surrender incentives, and affect the decomposition of contract value. The findings highlight the importance of modelling financial tail risk and interest-rate risk jointly when pricing long-term insurance guarantees with LTC-contingent benefits. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2605.30567 |
| By: | Duan, Yi (CPC Shangyou County Committee, Ganzhou, Jiangxi Province, China) |
| Abstract: | How can a resource constrained rural county activate latent social capital to sustain governance under conditions of advanced aging and out migration? This paper examines Shangyou County, a mountainous, formerly poverty designated county in Jiangxi Province, China, where between 2022 and 2025 local authorities developed five interlocking governance innovations: the consolidation of fragmented grid systems, the mobilization of elder councils for dispute mediation, the creation of county wide social psychological services, the repurposing of cultural centers as tourism infrastructure, and the synchronization of employment support with community corrections. Drawing on sociological theories of social capital, co production, and active aging, the paper argues that these innovations share a common logic: the deliberate conversion of existing but un activated relational resources into structured governance partnerships. The analysis identifies four mechanisms—organizational consolidation, social capital activation, vertical mandate leveraging, and sequential scaling—that enable this conversion. The case demonstrates that even in counties where fiscal capacity is severely limited and the population is demographically skewed toward the elderly, sustainable governance innovation is possible when local institutions recognize and mobilize the social authority embedded in community networks. |
| Date: | 2026–05–30 |
| URL: | https://d.repec.org/n?u=RePEc:osf:socarx:u257n_v1 |
| By: | Meryem Gökten (The Vienna Institute for International Economic Studies, wiiw); Philipp Heimberger (The Vienna Institute for International Economic Studies, wiiw) |
| Abstract: | This paper examines the role of ageing costs in the reformed EU fiscal rules. Governments must pre-emptively tighten fiscal policy to offset projected ageing cost increases, but required adjustments depend on underlying assumptions. Using alternative scenarios, we show that small changes in ageing cost assumptions can lead to marked differences in debt paths and consolidation needs. The framework ignores ageing-related uncertainty in these projections. Lower ageing costs may even raise long-run debt by reducing upfront tightening. Overall, our results highlight that fiscal adjustment requirements – and their economic effects – are highly sensitive to uncertain and arbitrary ageing-related assumptions. |
| Keywords: | Ageing costs, fiscal policy, fiscal rules, austerity, public debt, debt sustainability |
| JEL: | E62 J11 J14 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:wii:wpaper:276 |
| By: | Mori, Tomoya |
| Abstract: | Hoshi (2026) argues that population decline accounts for only a small share of Japan's slowdown; that Tokyo's overconcentration reflects declining gross mobility, not increased one-way migration; that women's low gross migration reflects ``relative immobility''; that declining mobility is a greater demographic challenge than population decline; and that the challenge is therefore more institutional than demographic. Each of these readings inverts on closer examination. Growth accounting treats population and productivity as independent, ignoring the channels through which demographic decline shapes productivity: structural transformation, reallocation, and agglomeration. Net concentration in the Tokyo Metropolitan Area has accelerated since 2010; per-capita migration rates have risen across all age groups, the gross-volume decline reflecting the shrinking young cohort. Women flow into Tokyo more strongly than men, stay longer once there, and leave non-metropolitan regions more strongly: directional, not relative, immobility. Hoshi's prescriptions---raise mobility, abandon regional retention, focus on productivity---amount to describing a healthier Japan rather than curing the present one---a description unimpeachable as advice but silent on why Japan is where it is, or how to move it elsewhere. |
| Keywords: | Demographic decline; Internal migration; Tokyo concentration; Gender migration; Agglomeration; Growth accounting |
| JEL: | J11 J61 O47 R11 R23 |
| Date: | 2026–04–26 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:128962 |
| By: | Wabenga Yango, James |
| Abstract: | This paper develops a general-equilibrium overlapping-generations model with endogenous fertility, in which firms accumulate both physical and artificial intelligence (AI) capital, and uses it to study the macroeconomic transmission of two structural disturbances: an AI technology shock and a longevity shock. The AI shock acts as a capital-demand disturbance: it raises all rates of return, most sharply the return to AI capital, reallocates investment from physical to AI capital, and produces a frontloaded expansion of output that decays monotonically. The longevity shock acts as a saving-supply disturbance: it deepens the aggregate capital stock, compresses returns and the real interest rate, and generates hump-shaped, persistent dynamics. The two shocks move fertility in opposite directions: AI raises it modestly through an income effect, while longevity lowers it by strengthening the life-cycle saving motive and the opportunity cost of child-rearing. A forecast-error variance decomposition attributes the bulk of the volatility in most aggregate variables to the longevity shock, while the AI shock accounts for the largest share of the variance in the return to AI capital. Fertility is strongly countercyclical and almost perfectly negatively correlated with hours worked, placing the household time-allocation margin at the center of the transmission mechanism. A robustness analysis confirms that these conclusions reflect structural properties of the model: variation in the capital share and in the persistence of the AI shock leaves the signs of the wage, fertility, output, and consumption responses unchanged, and only the labor–AI elasticity of substitution can reverse them, beyond a threshold that lies well above standard empirical estimates. |
| Keywords: | Artificial intelligence; endogenous fertility; longevity; general equilibrium; life-cycle model; capital accumulation; demographic transition. |
| JEL: | E22 E32 J11 J13 J26 O33 O41 |
| Date: | 2026–06–01 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:129480 |
| By: | Sangyup Choi (Yonsei University); Hyunpyung Kim (University of Texas at Austin) |
| Abstract: | This paper estimates Korea's long-run real neutral interest rate and quantifies the structural forces behind its decline since 1990. Using semiannual data for 12 advanced economies over 1990-2024, we estimate a cross-country panel state-space model that separates country-specific productivity and demographic trends from common global components. Korea's neutral rate falls from about 1.6% in 1990 to roughly 0.7% in 2024. The model attributes this decline mainly to slower trend productivity growth, the post-2014 reversal in the working-age population share, and spillovers from major advanced economies. Safe-asset market forces also contribute, but supply and demand effects partly offset each other. Counterfactual simulations suggest that removing global spillovers would raise the 2024 estimate by about 0.6 percentage points, while holding the working-age share at its 2014 level would raise it by about 0.5 percentage points. Conditional demographic scenarios imply continued downward pressure absent offsetting structural changes, highlighting implications for monetary policy space. |
| Keywords: | Neutral interest rate; Demographic changes; Korean economy; Global spillovers; State space model |
| JEL: | E43 E47 E58 F15 F62 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:yon:wpaper:2026rwp-292 |