nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2011‒07‒13
25 papers chosen by
Erik Jonasson
Lunds Universitet

  1. The Age Pattern of Retirement: A Comparison of Cohort Measures By Frank T. Denton; Ross Finnie; Byron G. Spencer
  2. The employer’s perspective on retirement. By Henkens, C.J.I.M.; Dalen, H.P. van
  3. The determination of wages of newly hired employees: survey evidence on internal versus external factors By Kamil Galuščắk; Mary Keeney; Daphne Nicolitsas; Frank Smets; Pawel Strzelecki; Matija Vodopivec
  4. The Effect of Public Sector Employment on Women's Labour Market Outcomes By Anghel, Brindusa; de la Rica, Sara; Dolado, Juan José
  5. Early Life Health and Adult Earnings: Evidence from a Large Sample of Siblings and Twins By Lundborg, Petter; Nilsson, Anton; Rooth, Dan-Olof
  6. Part-Time Work, Fixed-Term Contracts, and the Returns to Experience By Fernández-Kranz, Daniel; Paul, Marie; Rodriguez-Planas, Nuria
  7. Health status and retirement decisison for older european couples. By Jiménez-Martín, Sergi; Labeaga, José M.; Martínez-Granado, Maite
  8. How temporary is temporary employment in Spain?. By Alba, Alfonso
  9. Fair Wages When Employers Face the Risk of Losing Money By Karina Gose; Abdolkarim Sadrieh
  10. “Geography of talent and regional differences in Spain” By Ebru Kerimoglu; Burhan Can Karahasan
  11. Career Changers in Teaching Jobs: A Case Study Based on the Swiss Vocational Education System By Hof, Stefanie; Strupler, Mirjam; Wolter, Stefan
  12. Wage Differences between the Private and the Public Sector in Serbia: Some Evidence from Survey Data By Kosovka Ognjenovic
  13. Multiple Glass Ceilings By Russo, Giovanni; Hassink, Wolter
  14. Who do High-growth Firms Employ, and Who do they Hire? By Coad, Alex; Daunfeldt, Sven-Olov; Johansson, Dan; Wennberg, Karl
  15. JOB CHARACTERISTICS AND EMPLOYEE WELLBEING: A CASE OF MALAYSIAN SMES By Shahrul Nizam Salahudin; Zuliawati Mohamed Saad; Shirley Ken Tzu Ting; Mohd Nur Ruzainy Alwi
  16. Recent Dynamics of Returns to Education in Transition Countries By Tom Coupe; Hanna Vakhitova
  17. The Reverse Gender Gap in Ethnic Discrimination: Employer Priors against Men and Women with Arabic Names By Mahmood Arai; Moa Bursell; Lena Nekby
  18. A Model of Multi-Dimensional Human Capital Investment: Specific vs. general investments under uncertainty By ICHIDA Toshihiro
  19. Labor Supply Elasticities in Europe and the US By Bargain, Olivier; Orsini, Kristian; Peichl, Andreas
  20. The causal effect of family difficulties during childhood on adult labour market outcomes By Emanuele Millemaci; Dario Sciulli
  21. Job Anxiety, Work-Related Psychological Illness and Workplace Performance By Jones, Melanie K.; Latreille, Paul L.; Sloane, Peter J.
  22. Earnings Returns to the British Education Expansion By Paul J Devereux; Wen Fan
  23. The effects of introducing a single open-ended contract in the Spanish labour market By Jose Ignacio García Pérez; Victoria Osuna
  24. Self-Employment of Rural-to-Urban Migrants in China By Giulietti, Corrado; Ning, Guangjie; Zimmermann, Klaus F.
  25. Pension reform, employment by age, and long-run growth in OECD countries. By T. BUYSE; F. HEYLEN; R. VAN DE KERCKHOVE

  1. By: Frank T. Denton; Ross Finnie; Byron G. Spencer
    Abstract: Measures of retirement that take a cohort perspective are appealing since retirement patterns may change, and it would be useful to have consistent measures that would make it possible to compare retirement patterns over time and between countries or regions. We propose and implement two measures. One is based on administrative income tax records and relates to actual cohorts; the other is based on a time-series of cross sectional labour force surveys and relates to pseudo-cohorts. We conclude that while the tax-based observations for actual cohorts provide a richer data set for analysis, the estimated measures of retirement and transition from work to retirement based on the two data sets are quite similar.
    Keywords: Measures of retirement, cohort perspective
    JEL: J14 J26
    Date: 2011–06
  2. By: Henkens, C.J.I.M. (Universiteit van Tilburg); Dalen, H.P. van (Universiteit van Tilburg)
    Date: 2011
  3. By: Kamil Galuščắk (Czech National Bank); Mary Keeney (Central Bank and Financial Services Authority of Ireland); Daphne Nicolitsas (Bank of Greece); Frank Smets (European Central Bank); Pawel Strzelecki (National Bank of Poland); Matija Vodopivec (Bank of Slovenia)
    Abstract: This paper uses information from a rich firm-level survey on wage and price-setting procedures, in around 15,000 firms in 15 European Union countries, to investigate the relative importance of internal versus external factors in the setting of wages of newly hired workers. The evidence suggests that external labour market conditions are less important than internal pay structures in determining hiring pay, with internal pay structures binding even more often when there is labour market slack. When explaining their choice firms allude to fairness considerations and the need to prevent a potential negative impact on effort. Cross-country differences, that do exist, are found to depend on institutional factors (bargaining structures); countries in which collective agreements are more prevalent and collective agreement coverage is higher report to a greater extent internal pay structures as the main determinant of hiring pay. Within-country differences are found to depend on firm and workforce characteristics; strong association between the use of external factors in hiring pay, on the one hand, and skills (positive) and tenure (negative) on the other.
    Keywords: wage rigidity; newly hired workers; internal pay structure; employee turnover; business cycle; survey data
    JEL: J31 J41 J51
    Date: 2011–04
  4. By: Anghel, Brindusa (FEDEA, Madrid); de la Rica, Sara (University of the Basque Country); Dolado, Juan José (Universidad Carlos III de Madrid)
    Abstract: This paper addresses the role played by Public Sector (PS) employment across different OECD labour markets in explaining: (i) gender differences regarding choices to work in either PS or private sector, and (ii) subsequent changes in female labour market outcomes. To do so, we provide some empirical evidence about cross-country gender differences in choice of employment in the PS vs. the private sector, using the European Community Household Panel (ECHP), in the light of different theories on gender behaviour in the labour market. We also analyze the main determinants of the hourly wage gaps across these two sectors for males and females separately. Finally, we document the main stylized facts about labour market transitions by male and female workers among inactivity, unemployment, working in the PS and working in the private sector.
    Keywords: labour market transitions, gender gaps, public sector employment
    JEL: J45 J16 J31
    Date: 2011–06
  5. By: Lundborg, Petter (Lund University); Nilsson, Anton (Lund University); Rooth, Dan-Olof (Linneaus University)
    Abstract: We study the relationship between early life health and adult earnings using a unique dataset that covers almost the entire population of Swedish males born between 1950 and 1970. The health information is obtained from medical examinations during the mandatory military enlistment tests at age 18, which we have further linked to register data on adult earnings. We find that most types of major diagnoses have long-run effects on future earnings with the largest effects resulting from mental conditions. Including sibling fixed effects or twin-pair fixed effects reduces the magnitudes of the estimates, although remaining substantial.
    Keywords: earnings, health, specific conditions, siblings, twins
    JEL: I1 J24 J31
    Date: 2011–06
  6. By: Fernández-Kranz, Daniel (IE Business School, Madrid); Paul, Marie (University of Freiburg); Rodriguez-Planas, Nuria (Universitat Autònoma de Barcelona)
    Abstract: Using data from Spanish Social Security records, we investigate the returns to experience in different flexible work arrangements, including part-time and full-time work, and permanent and fixed-term contracts. We use a trivariate random effects model which consists of a three-equation system that is estimated simultaneously by Markov Chain Monte Carlo techniques. Our results indicate that there is a large pay gap for working part-time which persists many years after having resumed full-time work. We also find that working part-time involves lower returns to experience than standard full-time employment and thus a substantial negative wage differential for those employed part-time accumulates over time. Finally, we find that heterogeneity exist by contract type and motherhood status.
    Keywords: fixed-term and permanent contracts, part-time employment, returns to experience of differential work histories, random effects models, MCMC, motherhood
    JEL: J16 J24 J31 J41 C11 C33
    Date: 2011–06
  7. By: Jiménez-Martín, Sergi; Labeaga, José M.; Martínez-Granado, Maite
    Abstract: In this paper we use data the European Community Household Panel (ECHP) to describe and analyse the dynamics of joint labour force behaviour of older couples for the EUI2 countries. We focus on three main issues: the relanvance of joint retirement across EUI2 countries, the existence of complementarities in leisure and/or assortative matting and the effects of health variables. Concerning the evidence, we first find that a working spouse is more likely to retire the more recently the other spouse has retired; this effect is stronger if the wife is the working spouse. Second, there is evidence of assortative mating and/or complementarities in leisure; the effects of all relevant factors on the retirement decision of one spouse depend strongly on whether the other one is working, unemployed, or retired. Third, besides the standard evidence that poor health increases the retirement probabiliby, we find that the husband's health affects the couple's retirement decisions much more strongly than the wife's health does. Additional asymmetric effects are detected with respect to income related variables.
    Keywords: Joint retirement decisions; Labour force transitions; Health variables; Asymmetric effects;
  8. By: Alba, Alfonso
    Abstract: We use the Spanish Labor Force Survey (EPA) for the period 1987-1996 to study trends, characteristics, and labor force transitions of temporary workers. These are workers who hold fixed-term contracts, which the Spanish labor law distinguishes from indefinite contracts. Since the EPA questionnaire allows us to identify permanent from temporary workers, we are able to compare their characteristics. More importantly, we can use matched fIles from the same data source to analyze transitions from temporary to permanent employment. The aim is to test the extent to which temporary workers tend to be trapped in temporary employment relationships. Indeed, we fmd some evidence of this.
    Keywords: Permanent and temporary employment; Fixed-term contract; Transition rate;
  9. By: Karina Gose (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg); Abdolkarim Sadrieh (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)
    Abstract: We study the behavior of employers and employees in a gift exchange game and find that employers offer lower wages when there is the risk of losing money. This, however, does not lead to lower effort level choices. In fact, effort per wage unit is significantly higher in the treatment with potential employer losses. This result can be in line with social comparison theories that are based on relative payoff differences. Alternatively, this result is also in line with the hypothesis that the risk of losing money increases the credibility of the employer's trust signal and, thus, the employee's reciprocity.
    Keywords: fair wage, efficiency wage, social comparison, loss aversion
    JEL: C92 J41
    Date: 2011–04
  10. By: Ebru Kerimoglu (Istanbul Technical University, Department of Urban and Regional Planning); Burhan Can Karahasan (Istanbul Bilgi University, Department of International Finance)
    Abstract: Tentative empirical evidence suggests that the agglomeration of talent contributes to regional development. However, given that talented people are not evenly distributed across regions, this paper seeks to determine how the concentration of talent affects patterns of regional development. Here, we empirically evaluate the effects of the distribution of talent on regional differences by means of a detailed analysis of the 17 Autonomous Communities of Spain between 1996 and 2004. We hypothesise that regions specialising in strategic sectors that are creative and which can be assumed to enjoy rapid growth in productivity will experience faster rates of development and, in turn, that this concentration of talent will have a positive impact on the region’s economic performance. Thus, we believe that this mechanism can explain the marked regional imbalances in Spain. Our findings confirm that regional differences, measured in terms of GDP per capita and by, - industrial and service- oriented production, are influenced by the Communities’ talent bases as determined by, educational attainment and employment in assumed to be strategic for regional development, inasmuch as these sectors provide economic specialization.
    Keywords: Talent, Regional differences, Panel data, Spain. JEL classification: C33, O18, R11, J24.
    Date: 2011–06
  11. By: Hof, Stefanie (Swiss Co-ordination Center for Research in Education); Strupler, Mirjam (University of Bern); Wolter, Stefan (University of Bern)
    Abstract: This study investigates the determinants and motives of professionals who change career to vocational teaching. The framework for this study is the Swiss vocational education system, which requires that teachers of vocational subjects must have a prior career in that specific field. Thus, to work in teaching, every vocational teacher has to change his or her initial career. This paper focuses on the relevance of monetary motives for changing a career to teaching. Using a unique data set of trainee teachers, we show that professionals who change their careers to teaching earned on average more in their first career than comparable workers in the same occupation. Our findings additionally demonstrate that the average career changer still expects to earn significantly more as a teacher than in the former career. However, the study shows substantial heterogeneity and a zero wage elasticity of the teacher supply, suggesting that non-monetary motives are more relevant for career change than monetary factors.
    Keywords: career change, occupational change, rate of return to education, wage differentials, teacher wages, vocational education and training
    JEL: C21 I20 J24 J45 J62
    Date: 2011–06
  12. By: Kosovka Ognjenovic
    Abstract: In this paper is estimated the wage gap between the public and the private sector in Serbia, for women and men separately. The results show that, with advance of the transition, the public sector generates wage premium for those who work in that sector compared to the employed in the private sector. The public sector overpaid both men and women compared to their counterparts in the private sector, but the estimated wage premium for women is lower compared to the estimated wage premium for men (22.3 percent and 25.4 percent, respectively; both estimates are statistically significant). The only group of workers who are penalized for working in the public sector is comprised of women and men who have higher education. In order to estimate the sectoral wage gap by gender several regression models were used: the quantile regressions, the pooled OLS regression and the fixed-effects panel data model. The data that are used in the analysis are taken from the Serbian Living standard measurement surveys for 2003 and 2007.
    Keywords: transition, wage differences, public and private sectors, living standard measurement survey data
    JEL: J21 J31 J38 P2
    Date: 2011–02
  13. By: Russo, Giovanni (European Centre for the Development of Vocational Training (Cedefop)); Hassink, Wolter (Utrecht University)
    Abstract: Both vertical (between job levels) and horizontal (within job levels) mobility can be sources of wage growth. We find that the glass ceiling operates at both margins. The unexplained part of the wage gap grows across job levels (glass ceiling at the vertical margin) and across the deciles of the intra-job-level wage distribution (glass ceiling at the horizontal margin). This implies that women face many glass ceilings, one for each job level above the second, and that the glass ceiling is a pervasive phenomenon. In the Netherlands it affects about 88% of jobs, and 81% of Dutch women in employment work in job levels where a glass ceiling is present.
    Keywords: glass ceiling, wage gap, gender
    JEL: J31 J24 J22
    Date: 2011–06
  14. By: Coad, Alex (Science and Technology Policy Research (SPRU), Freeman Centre, University of Sussex); Daunfeldt, Sven-Olov (The Swedish Retail Institute (HUI) and Dalarna University); Johansson, Dan (The Ratio Institute); Wennberg, Karl (The Ratio Institute and Stockholm School of Economics)
    Abstract: The purpose of this paper is to study who high- growth firms (HGFs) hire using a matched employer-employee dataset for all knowledge intensive industries in Sweden, where high growth is measured over the period 1999-2002. The results indicate that HGFs to a larger extent employ young people, immigrants, and individuals with longer unemployment periods. However, these patterns seem contingent on the stage of firm evolution. HGFs that have already realized rapid growth seem to start focusing on hiring individuals from other companies, even though immigrants are still overrepresented among new employees.
    Keywords: Gazelles; firm growth; rapid firm growth; high-impact firms
    JEL: D24 L25 L26
    Date: 2011–07–01
  15. By: Shahrul Nizam Salahudin; Zuliawati Mohamed Saad; Shirley Ken Tzu Ting; Mohd Nur Ruzainy Alwi (College of Business Management and Accounting, UNITEN)
    Abstract: Malaysia has a vision of becoming a developed nation by the year 2020. In line with this vision the country has also recently acknowledged that the best way forward is through higher productivity by its total workforce. Hence, the need of assuring employees wellbeing arises. The purpose of this research paper is to find out empirically the relationship between job content factors and employees’ well-beings in Malaysia’s small and medium enterprises (SMEs). This paper uses structural equation modeling in determining the path and degree of relationship between the said variables. Interestingly, the study found that the employees’ well-being both psychologically and physiologically were unexpectedly low. Also, it was found that the relationship between job characteristics and employees well-being do exist and with high significance levels. Based on the results, this study offers fascinating insights on employees’ well-beings in Malaysian SMEs and the factors that are associated with it
    Keywords: Job Characteristics, Employee Wellbeing, SMEs, General Health
    JEL: M00
    Date: 2011–06
  16. By: Tom Coupe (Kyiv School of Economics, Kyiv Economic Institute); Hanna Vakhitova (Kyiv School of Economics, Kyiv Economic Institute)
    Abstract: This study provides recent estimates of returns to education in transition countries, investigating how the economic boom in the region has affected these returns. We find that transition countries continue to have relatively low returns to education and that the economic boom did not lead to a clear change in these returns. A more detailed investigation for one specific country, Ukraine, confirms these results.
    Keywords: returns to education, transition countries
    JEL: J24 J31 P2 P3 P5
    Date: 2011–06
  17. By: Mahmood Arai; Moa Bursell; Lena Nekby
    Abstract: We examine differences in the intensity of employer priors against men and women with Arabic names in Sweden by testing how much more work experience is needed to eliminate the disadvantage of having an Arabic name on job applications. Employers are first sent CVs of equal merits in a field-experiment setup. Arabic-named CVs are thereafter enhanced with more relevant work experience than Swedishnamed CVs. Results indicate a reverse gender gap in employer priors as initial differences in call-backs disappear for female applicants when CVs for Arabic-named applications are enhanced, but remain strong and significant for male applicants. Thus, contrary to what is often assumed about the interaction of gender and ethnicity, we find that Arabic men face stronger discrimination in the labor market than Arabic women.
    Keywords: Employment Gaps; Gender; Ethnicity,; Field Experiments; Discrimination
    JEL: J15 J16 J71
    Date: 2011–07
  18. By: ICHIDA Toshihiro
    Abstract: Specialization and the division of labor are the sources of high productivity in modern society. When worker skills are multi-dimensional, workers may face a choice between general versus specific human capital investment. Given that individual agents face uncertainty in the relative output price, what are the optimal strategies for heterogeneous individual agents in human capital investment? In the absence of insurance markets, general investment gives an option value for changes in the environment. We analyze a model in which workers are born heterogeneous and are endowed with two-dimensional skills in different sectors, to determine if incentives exist for workers to invest in skills in which they had originally excelled or struggled. We find that some workers choose to invest in their weaker skill, via specific human capital investment, provided that the scale of the risk is big and that the parameter of relative risk aversion is greater than one. We find that there exist agents whose optimal human capital investment decisions reverse their ex ante comparative advantages ex post.
    Date: 2011–07
  19. By: Bargain, Olivier (University College Dublin); Orsini, Kristian (K.U.Leuven); Peichl, Andreas (IZA)
    Abstract: Despite numerous studies on labor supply, the size of elasticities is rarely comparable across countries. In this paper, we suggest the first large-scale international comparison of elasticities, while netting out possible differences due to methods, data selection and the period of investigation. We rely on comparable data for 17 European countries and the US, a common empirical approach and a complete simulation of tax-benefit policies affecting household budgets. We find that wage-elasticities are small and vary less across countries than previously thought, e.g., between .2 and .6 for married women. Results are robust to several modeling assumptions. We show that differences in tax-benefit systems or demographic compositions explain little of the cross-country variation, leaving room for other interpretations, notably in terms of heterogeneous work preferences. We derive important implications for research on optimal taxation.
    Keywords: household labor supply, elasticity, taxation, Europe, US
    JEL: C25 C52 H31 J22
    Date: 2011–06
  20. By: Emanuele Millemaci (Università di Messina); Dario Sciulli (Università di Chieti-Pescara and CEEAplA)
    Abstract: A propensity score matching approach and the National Child Development Study cohort database are used to evaluate the total causal effect of family difficulties during childhood on adult labour market outcomes. We find statistically significant evidence of a negative and long-lasting impact on employment probabilities and wages. Our estimates suggest that the occurrence of family problems in childhood reduces the chances of being employed by about 6 % and employees’ hourly wages by about 8.4 percent. Moreover, this effect appears not to decline over the cohort working life. Looking at specific family difficulties, we find that economic difficulties determine the greatest disadvantages in terms of future labour market outcomes. These results are consistent with respect to estimations with standard parametric methods. Economic and social policies aimed to prevent poor labour market performances, and possibly consequent social exclusion and immobility in adulthood, should also take into account the role of the various factors affecting family environment during childhood.
    Keywords: family difficulties, childhood, propensity score matching, labour market outcomes, causal effects
    JEL: J12 J13 C21
    Date: 2011–06–30
  21. By: Jones, Melanie K. (Swansea University); Latreille, Paul L. (Swansea University); Sloane, Peter J. (Swansea University)
    Abstract: This paper uses matched employee-employer data from the British Workplace Employment Relations Survey (WERS) 2004 to examine the determinants of employee job anxiety and work-related psychological illness. Job anxiety is found to be strongly related to the demands of the job as measured by factors such as occupation, education and hours of work. Average levels of employee job anxiety, in turn, are positively associated with work-related psychological illness among the workforce as reported by managers. The paper goes on to consider the relationship between psychological illness and workplace performance as measured by absence, turnover and labour productivity. Work-related psychological illness is found to be negatively associated with several measures of workplace performance.
    Keywords: job anxiety, stress, absence, labour productivity
    JEL: I0 J28 J81 J20
    Date: 2011–06
  22. By: Paul J Devereux (University College Dublin); Wen Fan (University College Dublin)
    Abstract: We study the effects of the large expansion in British educational attainment that took place for cohorts born between 1970 and 1975. Using the Quarterly Labour Force Survey, we find that the expansion caused men to increase education by about a year on average and gain about 8% higher wages; women obtained a slightly greater increase in education and a similar increase in wages. Clearly, there was a sizeable gain from being born late enough to take advantage of the greater educational opportunities offered by the expansion. Treating the expansion as an exogenous increase in educational attainment, we obtain instrumental variables estimates of returns to schooling of about 6% for both men and women.
    Keywords: return to education; higher education expansion
    Date: 2011–06–28
  23. By: Jose Ignacio García Pérez (Department of Economics, Universidad Pablo de Olavide & FEDEA); Victoria Osuna (Department of Economics, Universidad Pablo de Olavide)
    Abstract: This paper quantifies the effects of introducing a single open-ended contract for new hires, with increasing severance payments as an alternative to the current situation in Spain, where both temporary and permanent contracts are available. One of the reasons for the excessive job destruction in this economy is the intensive use of temporary contracts. The main driving force behind firm behaviour is the large gap in severance payments between temporary and permanent contracts (8 vs. 45 days of wages per year of seniority). We use a search and matching type model of job creation and destruction that is able to generate the main properties of a segmented labour market like the Spanish one. We use this model to simulate the effects of introducing this new design in severance payments. Our results show that this contract decreases unemployment (by 21%) and job destruction (which is almost halved in contracts with a tenure of fewer than four years) and tempers both the probability of being fired and tenure distribution as severance payments are reduced. Almost 15% more workers have a tenure of more than 3 years, and there are 23% fewer one-year contracts. The transition shows that the single open-ended contract would be highly beneficial for a majority of workers (only 8% would be jeopardised) because job stability would substantially increase. Firms, would also benefit from a reduction in their expected severance costs by about 9%.
    Keywords: Single Contract; Permanent and Temporary contracts; Severance Payments; Job seniority; Tenure distribution; Job destruction.
    JEL: J32 J63 J65
    Date: 2011–06
  24. By: Giulietti, Corrado (IZA); Ning, Guangjie (Nankai University); Zimmermann, Klaus F. (IZA and University of Bonn)
    Abstract: This paper focuses on the determinants of self-employment among rural to urban migrants in China. Two self-selection mechanisms are analysed: the first relates to the manner in which migrants choose self-employment or paid work based on the potential gains from either type of employment; the second takes into account that the determinants of the migration decision can be correlated with employment choices. Using data from the 2008 Rural-Urban Migration in China and Indonesia (RUMiCI) survey, a selection model with endogenous switching is estimated. Earnings estimates are then used to derive the wage differential, which in turn is used to model the employment choice. The procedure is extended to account for migration selectivity and to compare individuals with different migration background and employment histories. The results indicate that self-employed individuals are positively selected with respect to their unobserved characteristics. Furthermore, the wage differential is found to be an important driver of the self-employment choice.
    Keywords: self-employment, wages, rural to urban migration, selection bias magnets, European Union
    JEL: J23 J61 O15
    Date: 2011–06
    Abstract: We study the effects of pension reform in a four-period OLG model for an open economy where hours worked by three active generations, education of the young, the retirement decision of older workers, and aggregate per capita growth, are all endogenous. Next to the characteristics of the pension system, our model assigns an important role to the composition of fiscal policy. We find that the model explains the facts remarkably well for many OECD countries.<br> Our simulation results prefer an intelligent pay-as-you-go pension system above a fully-funded private system. When it comes to promoting employment, human capital, growth, and welfare, positive effects in a PAYG system are the strongest when it includes a tight link between individual labor income (and contributions) and the pension, and when it attaches a high weight to labor income earned as an older worker to compute the pension assessment base.
    Date: 2011–05

This nep-lma issue is ©2011 by Erik Jonasson. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.