Longevity, Working Lives and Public Finances

Can longer working lives bring sufficient tax revenues to pay for the growing public health and care expenditure that longer lifetimes cause? We review studies concerning retirement decisions and pension policies, the role of mortality in health and long-term care costs, and errors in mortality projections. We combine key results into a numerical OLG model where changes in mortality have direct effects both on working careers and on per capita use of health and long-term care services. The model has been calibrated to the Finnish economy and demographics. Although there are huge uncertainties concerning future health and long-term care expenditure when people live longer, our simulations show that without policies directed to disability admission rules and old-age pension eligibility ages, working lives are unlikely to extend sufficiently. But, importantly, with such policies it seems quite possible that generations enjoying longer lifetimes can also pay for the full costs by working longer.

Publication info

Series
ETLA Working Papers 24
Date
09.04.2014
Keywords
life expectancy, working careers, health and long-term care expenditure, fiscal sustainability
ISSN
2323-2420 , 2323-2439
JEL
H30, H63, H68, J11
Pages
19
Price
15 €
Availability of print version
Available
Language
English