LONGEVITY, WORKING LIVES, AND PUBLIC FINANCES

Abstract

We find that linking statutory retirement ages to life expectancy is a promising way to extend working lives and generate enough tax revenues so that generations enjoying longer lifetimes can also pay for the consequent increase in pensions and public health and long-term care (LTC) expenditure. We use a numerical economic model, calibrated to the Finnish economy and demographics, in which mortality affects both retirement ages and per capita use of health and LTC services. Uncertainty in mortality projections and the resulting uncertainties in public finances and retirement policy effects are considered explicitly. (JEL H30, H63, H68, J11).