Working Less for Longer: Unintended Effects of Longevity Adjustment of Retirement Age

Svend E. Hougaard Jensen*, Thorsteinn Sigurdur Sveinsson, Miguel Sousa Duarte

*Corresponding author for this work

Research output: Contribution to journalJournal articleResearchpeer-review

30 Downloads (Pure)

Abstract

Using a standard macro model with overlapping generations in the manner of Blanchard-Yaari, we show that by broadening the labour supply on the extensive margin through longevity adjustment of the statutory retirement age, labour supply is likely to decrease on the intensive margin. However, this backlash effect depends on the specific design of the pension system. It is significantly higher under a pay-as-you-go scheme with fixed benefits compared to a pay-as-you-go scheme with fixed contributions and a fully funded scheme based on voluntary savings. The findings have implications for responses to the fiscal and macroeconomic challenges raised by an ageing population.
Original languageEnglish
JournalInternational Tax and Public Finance
Number of pages30
ISSN0927-5940
DOIs
Publication statusPublished - 26 Sept 2024

Bibliographical note

Epub ahead of print. Published online: 26 September 2024.

Keywords

  • Demographic change
  • Pension reform
  • Retirement
  • Labour supply

Cite this