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Unexpected longevity, intergenerational policies, and fertility.

Jisoo Hwang1, Seok Ki Kim2

  • 1College of Liberal Studies, Seoul National University, 1 Gwanak-ro, Gwanak-gu, Seoul, 08826 South Korea.

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|May 24, 2023
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Unexpected longevity gains impact older individuals financially, prompting younger generations to reduce fertility due to increased savings needs and higher taxes for social security. This affects government spending on families and the elderly.

Keywords:
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Area of Science:

  • Demography
  • Economics
  • Public Policy

Background:

  • Longevity is increasing globally, impacting social security systems.
  • Distinguishing between expected and unexpected longevity gains is crucial for policy analysis.

Purpose of the Study:

  • To analyze the dynamic effects of expected and unexpected longevity gains on intergenerational policies and fertility.
  • To investigate the impact of longevity on individual saving behavior and government social spending.

Main Methods:

  • Utilizing an overlapping-generations economic model with means-tested pay-as-you-go social security.
  • Employing cross-country panel data on mortality rates and social expenditure.

Main Results:

  • Unexpected longevity gains lead to greater financial hardship for the elderly compared to expected gains.
  • Increased life expectancy at 65 reduces total fertility rate and family-related government spending growth.
  • Unexpected longevity gains increase government old-age spending growth.

Conclusions:

  • Longevity gains, particularly unexpected ones, necessitate adjustments in intergenerational policies.
  • Policy effects and life-cycle considerations influence fertility decisions in response to longevity.
  • Governments must adapt social security and family policies to address demographic shifts.