, Volume 33, Issue 1, pp 19–33 | Cite as

Employment and growth in an aging society: a simulation study for Austria

  • Josef Baumgartner
  • Helmut Hofer
  • Serguei Kaniovski
  • Ulrich Schuh
  • Thomas UrlEmail author


In this study we use a long run macroeconomic model for Austria to simulate the effects of aging on employment, output growth, and the solvency of the social security system. By disaggregating the population into six age cohorts and modelling sex specific participation rates for each cohort we are able to account for the future demographic trends. Apart from a baseline scenario, we perform three alternative simulations that highlight the effects of aging from different perspectives. These include (1) purely demographic developments, (2) increasing labour market imperfections, and (3) higher economic growth due to a productivity shock.


Economic growth Aging Austria 

JEL Classification

C6 E2 O4 


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.



All authors would like to thank Werner Roeger, Stephen Hall, Arjan Lejour, Bert Smid, Johann Stefanits, Andreas Wörgötter, Paul Kellermann, Peter Part, and the participants of two modelling workshops hosted by the Institute of Advances Studies (IHS) in Vienna as well as the annual NOEG meeting in Vienna and the ECOMOD conference in Paris 2004 for helpful comments and suggestions. We are particularly indebted to Fritz Breuss and Robert Kunst for valuable discussions during the project. The responsibility for all remaining errors remains entirely with us.

The development of A-LMM has been funded by a research grant from the Austrian Federal Ministry of Social Security, Generations and Consumer Protection (Grant GZ:21.101/74–8/02). This financial support is gratefully acknowledged.


  1. Baumgartner J, Hofer H, Kaniovski S, Schuh AU, Url T (2004) A long-run macroeconomic model of the austrian economy (A-LMM). WIFO working paper 2004Google Scholar
  2. Blanchard O, Katz LF (1999) Wage dynamics: reconciling theory and evidence. Am Econ Rev Pap Proc 89:69–74Google Scholar
  3. Bosworth BP, Collins SM (2003) The empirics of growth: an update. Brookings Pap Econ Act 2:113–179CrossRefGoogle Scholar
  4. Economic Policy Committee (2001) Budgetary challenges posed by aging populations: the impact on public spending on pensions, health and long-term care for the elderly and possible indicators of the long-term sustainability of public finances, EPC/ECFIN/655/01-EN final, Brussels, 24 October 2001.
  5. Economic Policy Committee (2002) Reform challenges facing public pension systems: the impact of certain parametric reforms on pension expenditure, EPC/ECFIN/237/02 - final, Brussels, 5 July 2002.
  6. Englander AS, Gurney A (1994) OECD productivity growth: medium-term trends. OECD Econ Stud 22:111–154Google Scholar
  7. European Commission (2001) Public finances in EMU—2001, European economy, No. 3. Directorate-General for Economic and Financial Affairs, BrusselsGoogle Scholar
  8. European Commission (2002) Public finances in EMU—2002, European economy, No. 3. Directorate-General for Economic and Financial Affairs, BrusselsGoogle Scholar
  9. Guger A, Mayrhuber C (2001) Labour force participation and public pension system. Changes in the labour market and their impact on the pension dependency ratio. Aust Econ Quart 2:47–56Google Scholar
  10. Hamermesh DS (1993) Labor demand. Princeton University Press, PrincetonGoogle Scholar
  11. Hanika A, Lebhart G, Marik S (2004) Zukünftige bevölkerungsentwicklung österreichs bis 2050 (2075). Statistische Nachrichten (1):18–33Google Scholar
  12. Hayashi F (1982) Tobin’s marginal Q and average Q: a neoclassical interpretation. Econometrica 50(1):213–224CrossRefGoogle Scholar
  13. Koch M, Thimann C (1997) From generosity to sustainability: the Austrian pension system and options for its reform. IMF working paper, Washington DC (10)Google Scholar
  14. Leibfritz W, Roseveare D, Fore D, Wurzel E (1996) Ageing populations, pension systems and government budgets—how do they affect saving? In: OECD (ed) Future global capital shortages: real threat or pure fiction? Paris, pp 47–102Google Scholar
  15. Nickell S, Nunziata L, Ochel W, Quintini G (2003) The beveridge curve, unemployment and wages in the OECD from the 1960s to the 1990s, 2002, forthcoming. In: Aghion P, Frydman R, Stiglitz J, Woodford M (eds) Knowledge, information and expectations in modern macroeconomics in honor of Edmund S. Phelps. Princeton University Press, PrincetonGoogle Scholar
  16. Part P (2002) Finanzielle Auswirkungen der bevölkerungsalterung, Working papers. Federal Ministry of Finance, Vienna (8)Google Scholar
  17. Part P, Stefanits H (2001) Austria: public pension projections 2000–2050, Working papers. Federal Ministry of Finance, Vienna (7)Google Scholar
  18. Solow RM (2000) Growth theory—an exposition. Oxford University Press, OxfordGoogle Scholar

Copyright information

© Springer Science+Business Media B.V. 2006

Authors and Affiliations

  • Josef Baumgartner
    • 1
  • Helmut Hofer
    • 2
  • Serguei Kaniovski
    • 1
  • Ulrich Schuh
    • 2
  • Thomas Url
    • 1
    Email author
  1. 1.Austrian Institute of Economic Research (WIFO)ViennaAustria
  2. 2.Institute of Advanced Studies in Vienna (IHS)ViennaAustria

Personalised recommendations