How Aging of the Labor Force A¤ects Equilibrium Unemployment

This paper argues that aging of the labor force a¤ects job creation and job destruction. To analyze this, we extend a standard model of equilibrium unemployment and search in the labor market by the distinction between age speci\u85c separation risks and a productivity di¤erential between young and elderly workers. Based on the theo-retical model, we identify four regimes of changes in the Beveridge Curve and job creation which can occur if the age structure varies. We also present an econometric model to \u85nd out which country re-lates to which regime. According to the estimates we can identify all four cases. For example, Spain and the US may experience positive e¤ects on employment when the labor force grows older. In contrast to this, the unemployment rate in Germany and Japan will rise as a consequence of the increase in the share of elderly workers