Dissertation

Table 3.29: The effect of population aging on the households’ IRRs with the pollution externality.

Experiment β_ϕ=0.15 β_ϕ=0.3625 β_ϕ=0.575 β_ϕ=0.7875 β_ϕ=1 Rate of return

Baseline 0.0579 0.0326 0.0203 0.0104 0.0023 0.0293
1 0.0559 0.0303 0.0179 0.0072 -0.0011 0.0288
2 0.0548 0.03 0.0141 0.003 -0.0045 0.0246
3 0.0534 0.028 0.0101 0.0001 -0.0067 0.0203

Table 3.30: The effect of population aging on household retirement with the pollution externality.

Experiment ϕ = 0.15 ϕ = 0.3625 ϕ = 0.575 ϕ = 0.7875 ϕ = 1 Average Baseline 62 62 62 62.77 63.64 62.48

1 62 62 62 62.96 63.8 62.55

2 62 62 63.5 64.83 65.55 63.58
3 62 62.64 65.41 66.55 67.17 64.75

the different efficiency groups. Across the baseline and experiment 3, the IRRs of the five

efficiency groups decline by 7.8, 14.1, 50.3, 99 and about 400%, respectively. Once more,

it is clear that the effect on the households who actually benefit from the social security

program is relatively small. Table 3.30 shows that the asymmetric retirement responses from

the different efficiency groups are behind these IRRs: across the baseline and experiment

3, the retirement ages of the five quintiles increase by 0, 0.64, 3.41, 3.78 and 3.53 years

respectively. The larger delays in retirement experienced by the more efficient households

leads to their IRRs experiencing larger declines compared to the less efficient households.

I report in Table 3.31 the effective labor supply, the wage rate and the size of the tax

base in post-population aging steady state equilibria (with the social security tax rate held

fixed at the baseline level). This helps us understand the impact of population aging on

the tax base of the social security program in the presence of the pollution externality. It is

clear that even with the pollution externality, the delayed retirement and increased saving

mechanisms lead to an expansion of the tax base under population aging.

Finally, it is worth examining the effect that the optimal tax response has on the equilib-

rium stock of the pollutant in post-population aging equilibria. In Table 3.32, I compare the

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