Demographic change in Europe: the labor market and fiscal effects in 2030

Authors

Mathias Dolls, Karina Doorley, Hilmar Schneider, Eric Sommer

Publication Date

Jan 2014

Summary

The effect of demographic change on the labor force and on fiscal revenues is topical in light of population aging and potential pension shortfalls. This paper evaluates the effect of demographic changes between 2010 and 2030 on labor force participation and tax revenue. When assessing the effects of policy reforms on the labor market, most studies still only focus on labor supply. The interaction of supply and demand is not explicitly modeled, which can lead to biased estimates of potential labor market outcomes. This paper overcomes this shortcoming by feeding labor supply and labor demand elasticities into a setting where the population changes to reflect 2030 projections. We show how the interaction of labor supply and labor demand changes the projected labor force in 2030 and impacts on tax revenues. We find that disregarding the demand side reaction to demographic change leads to an underestimation of employment rates and tax revenue in the EU-27.

Publication type

Research Paper

Series Number

D10.8

Links

http://www.neujobs.eu/publications/working-papers/demographic-change-europe-labor-market-and-fiscal-effects-2030

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