Dissertation

Table 3.20: The effect of population aging on the households’ IRRs with the efficiency profile from Hansen (1993).

Experiment β_ϕ=0.18 β_ϕ=0.385 β_ϕ=0.59 β_ϕ=0.795 β_ϕ=1 Rate of return

Baseline 0.0485 0.0321 0.0256 0.0221 0.0198 0.0286
1 0.0415 0.024 0.0172 0.0135 0.0111 0.0234
2 0.0409 0.0233 0.0165 0.0128 0.0104 0.197
3 0.0402 0.0225 0.0157 0.0121 0.0097 0.016

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Table 3.21: The effect of population aging on the households’ labor supply with the efficiency profile from Hansen (1993).

Experiment ϕ = 0.18 ϕ = 0.385 ϕ = 0.59 ϕ = 0.795 ϕ = 1

Baseline 0.95 2.39 3.83 5.27 6.72 1 1.14 2.92 4.7 6.49 8.27 2 1.22 3.13 5.04 6.95 8.86 3 1.31 3.35 5.4 7.44 9.48

Decomposing the household labor supply responses along the intensive and the extensive

margins with the efficiency profile from Hansen (1993) also reveals a similar pattern (see

Table 3.22). As in the earlier cases, both the average labor hours between ages 25-55 and

the retirement ages increase under population aging. Across the baseline an experiment

3, the average labor hours for all but lowest efficiency group increase by 0.9, 1.6, 1.9 and

2%, respectively. The labor hours for the lowest efficiency group actually declines by 1.4%.

However, large delays in retirement across the baseline and experiment 3 for all the efficiency

groups: 8.3, 7.2, 6.8, 6.6 and 6.5 years, ensure that the more efficient households experience

larger increases in labor supply over the life-cycle.