Gerontocracy in Motion? – European Cross-Country Evidence on the Labor Market Consequences of Population Ageing

Gerontocracy in Motion?

9

In our description of the European ageing process, we have relied on the pop-
ulation fractions of the young, since they are indicative of both trends and tim-
ing. In our empirical application we need a more comprehensive approach in
order to disentangle typical life cycle patterns from the consequences of gen-
erational crowding. Therefore, in addition to other control variables, we utilize
relative cohort sizes for five-year intervals as explanatory variables for the in-
dividuals’ labor market status. Figure 3 displays the distribution of these co-
hort sizes across all EU-15 countries. These figures document the considerable
heterogeneity in relative cohort sizes across Europe, holding the promise that
our empirical analysis will be able to isolate the labor market consequences of
demographic changes.

Before we proceed to discuss the nexus of population ageing and (imperfectly
competitive) labor markets in detail, with a focus on (un-) employment, the
next few paragraphs provide a brief overview on the current labor market situ-
ation in the EU-countries. It is certainly fair to argue that the connection be-
tween the particular stage of the ageing process characterizing each of these
countries, and their respective unemployment burden is not obvious. Thus, to
reveal the effect of changes in the age structure a thorough multivariate analy-
sis is indispensable.

The labor market situation in almost all EU-countries is characterized by
rather high and persistent unemployment (e.g. Schmidt 2000a; 2000b for

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