The Lump of Labor Fallacy | Munich Center for the Economics of Aging - MEA


Macroeconomic Implications of Demographic Change

The Lump of Labor Fallacy

This project, commissioned by the World Economic Forum, summarizes the evidence against the lump of labor fallacy. It exploits international comparisons based on OECD employment data and German time series evidence based on German Bureau of Labor Statistics. Identifying instruments are labor market and pension policies from 1972 through 2007 which sometimes increased and at other times reduced employment of older individuals. We do not find a systematic negative (positive) correlation between the observed changes in older-age employment with employment (unemployment, respecitively) of younger individuals but rather the opposite: in most cases, policy interventions either strengthened employment for all ages or reduced it for all ages. This project has been successfully completed with a report published by the World Economic Forum.

Prof. Dr. h.c. Axel Börsch-Supan, Ph. D.