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WP6 – Inclusive Growth

  • Model the evolution of economic growth, its inclusiveness, social welfare and its intra- and intergenerational distribution during the population ageing process and its care wave
  • Close the micro model by computing wages and rates of return

Task 6.1: Adaptation to BB-Future model setting (MEA, M1-M12): Extend the OLG model by Börsch-Supan et al. (2021)
to include the other two branches of social insurance: health insurance and LTC insurance, and adapt it to be compatible
with the micro model (WP3-4) and the social insurance model (WP5). This specifically implies interaction gender with
the four dimensions of heterogeneity among household types: productivity, life expectancy, health-related fixed costs of
working, and preferences for consumption and leisure. This detailed setting allows for analyses of the differential effects
of various reforms specified in WP2 on the four outcome criteria within the same modelling framework.
Task 6.2: Calibration, solution and feedback loop (MEA, M13-M36): The structural parameters of the household model
are calibrated to match the most important simulated moments of our model to their empirical counterparts, based on
SHARE and OECD data. We consider a prototypical country, which is a synthetic aggregation of the population data from
the three largest continental European countries (France, Germany, and Italy, called EU3). We calculate the weighted
average moments for capital-output ratio, consumption output-ratio, average hours worked, retirement age and the social
insurance system’s expenditures (percentage of GDP) as targets for calibration. We will then feed the model by the
projected changes in the demographic and health structure (WP2) and the household decisions such as saving and labour
supply (participation and hours) from the micro model (WP3-4). Solving the model will generate wages and rates of
return which will be fed back to the micro model in a few iterations.
Task 6.3: Policy evaluation (MEA, M13-M45): Calculate the macroeconomic and distributional outcomes of a
benchmark scenario and the prototypical reform proposals that are developed in WP2. Formulate output as scientific
paper and as policy recommendations for WP7.
Role of participants: MEA will lead WP6 and execute Tasks 1-3 with input from MPG. The output of Task 3 will be
discussed among all participants.