An aggregate model for policy analysis with demographic change

Ellen R. McGrattan, Edward Prescott

Research output: Contribution to journalArticle

Abstract

Many countries are facing challenging fiscal financing issues as their populations age and the number of workers per retiree falls. Policymakers need transparent and robust analyses of alternative policies to deal with the demographic changes. In this paper, we propose a simple framework that can easily be matched to aggregate data from the national accounts. We demonstrate the usefulness of our framework by comparing quantitative results for our aggregate model with those of a related model that includes within-age-cohort heterogeneity through productivity differences. When we assess proposals to switch from the current tax and transfer system in the United States to a mandatory saving-for-retirement system with no payroll taxation, we find that the aggregate predictions for the two models are close.

Original languageEnglish (US)
Pages (from-to)52-61
Number of pages10
JournalJournal of the Economics of Ageing
Volume11
DOIs
StatePublished - May 2018

Keywords

  • Medicare
  • Retirement
  • Social Security
  • Taxation

ASJC Scopus subject areas

  • Life-span and Life-course Studies
  • Economics and Econometrics

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