The Economic Consequences of Ageing Populations

The present chapter examines past and projected population trends and assesses the implications of these latter trends for dependency ratio developments. The essential feature to highlight regarding past and current developments is the extent of the demographic upheaval which has and is occurring, due to falling birth rates and lengthening life spans. As regards future projections, while uncertainties exist, especially regarding the evolution of fertility rates, one fact appears indisputable namely that large increases in the share of the over 65s in the populations of the EU15, US and Japan will inevitably occur due to the fact that the post-war baby-boom generations in the latter areas will be reaching the normal retirement age in the early decades of the next century. It is envisaged that this ageing process, leading to higher dependency ratios in all of the three regions, will have major economic and social consequences for the countries affected, although accurate predictions will be difficult given that nothing is available in terms of historical demographic precedents.

1989

Demographic changes, such as those anticipated in most OECD countries, have many economics effects that impinge on a country's fiscal viability. Evaluation of the effects of associated changes in capital-labor ratios and the welfare and behavior of different generations requires the use of a dynamic general equilibrium model. The 75 generations -250 year demographic simulation model, presented in Auerbach and Kotlikoff (1987, Chapter 11), has been modified to incorporate bequest behavior, technological change, the possibility that the economy is open to international trade, and government consumption expenditures that depend on the age composition of the population. The model has been further adapted to study the effects of impending demographic changes in Japan, the Federal Republic of Germany, Sweden and the United States. The simulation results indicate that these changes will have a major impact on rates of national saving, real wage rate and current accounts. One of this paper's fundamental lessons is that allowing for general equilibrium adjustments reduces the adverse welfare effects of increasing dependency ratios. Nevertheless, the welfare costs, and particularly their distributions across cohorts, pose serious challenges for policy makers in some cases.

International journal of economics and finance, 2012

In the present research article, we outline the distinction between the demographic dependency ratio and the economic dependency ratio and present its evolution in Romania within the European Union, but not restrictive to the EU27. The evolution of demographic dependency ratio changed dramatically in Romania in the last 15 years comparing to the UE27. On the other hand, the evolution of economic dependency ratios is much more relevant because it also reflects the problems the economy is facing and should be brought to the fore in the political debates and to decision makers. In the paper we present the factors that are leading to the increase of the economic dependency ratio and we conclude with the solutions which a state has to adopt in order to prevent excessive public debt and structural gaps due to long term rise in economic dependency ratio. Moreover, policy-makers must face up the painful inter-temporal transfer choices that have to be done. Our concern about Eastern-European Countries is strengthened by the global results reached by OECD through Minilink Model Study, IMF Study of G7 and QUEST II Model that suggest the fall of the living standards over the next 50 years due to economic dependency ratio. For Romania we considered two main solutions to this problem: increasing birth rate (long term solution) and lowering the unemployment rate through investment and a high rate of EU funds absorption (medium term solution).

2010

Across the demographic transition, declining mortality followed by declining fertility produces decades of rising support ratios as child dependency falls. These improving support ratios raise per capita consumption, other things equal, but eventually deteriorate as the population ages. Population aging and the forces leading to it can produce not only frightening declines in support ratios but also very substantial increases in productivity and per capita income by raising investment in physical and human capital. Longer life, lower fertility, and population aging all raise the demand for wealth needed to provide for old-age consumption. This leads to increased capital per worker even as aggregate saving rates fall. However, capital per worker may not rise if the increased demand for wealth is satis ed by increased familial or public pension transfers to the elderly. Thus, institutions and policies matter for the consequences of population aging. The accumulation of human capital also varies across the transition. Lower fertility and mortality are associated with higher human capital investment per child, also raising labor productivity. Together, the positive changes due to human and physical capital accumulation will likely outweigh the problems of declining support ratios. We draw on estimates and analyses from the National Transfer Accounts project to illustrate and quantify these points.

Review of Income and Wealth, 1997

Lancet, 2014

Between now and 2030, every country will experience population ageing-a trend that is both pronounced and historically unprecedented. Over the past six decades, countries of the world had experienced only a slight increase in the share of people aged 60 years and older, from 8% to 10%. But in the next four decades, this group is expected to rise to 22% of the total population-a jump from 800 million to 2 billion people. Evidence suggests that cohorts entering older age now are healthier than previous ones. However, progress has been very uneven, as indicated by the wide gaps in population health (measured by life expectancy) between the worst (Sierra Leone) and best (Japan) performing countries, now standing at a difference of 36 years for life expectancy at birth and 15 years for life expectancy at age 60 years. Population ageing poses challenges for countries' economies, and the health of older populations is of concern. Older people have greater health and long-term care need...

OECD Economics Department Working Papers, 1998

Specifically the study provides an analysis of the international macroeconomic implications of ageing and a variety of alternative policies using a number of long-term scenarios and policy simulations. These are based on the OECD's newly-developed international dynamic general equilibrium macroeconomic model (MINILINK). As the abstract on the next page indicates more fully, the modelling suggests that only a combination of policies, carried out on a timely and co -ordinated international basis is likely to be successful in avoiding the slowdown in living standards that will be caused by ageing. Preliminary analysis also suggests the age-related pressures could be alleviated to only a modest extent by OECD investment in the non-OECD world.

Twenty-First Century Society, 2010

In the 1950s, 1960s and 1970s there was great concern that the population of the world was growing too rapidly. This concern generated a series of books aimed at getting the overpopulation message across to a more general audience. Perhaps three of the most influential were Karl Sax's Standing Room Only (1955), Paul Ehrlich's The Population Bomb (1968), and Donella H. Meadows et al.'s The Limits to Growth (1972). This view of impending 'doom and gloom' is best exemplified by Ehrlich's chilling warning: 'mankind will breed itself into oblivion (p. xii)'. It is safe to conclude that much of what was predicted in these books has not happened. The fact that the global population growth rate is slowing is welcome news in the sense that many of the economic, social and environmental problems caused and/or exacerbated by population growth should lessen. However, decreasing population growth, driven by declining fertility and longer lifespans among other things, is creating a new set of problems-the populations of many countries are ageing rapidly. 'Population ageing' is the redistribution of relative population shares away from the younger to the older age groups, leading to an increase in the average or median age of the population. According to the United Nations (2005), there are only 18 'outlier' countries, where currently population ageing is not occurring. In this sense, population ageing is a global phenomena and not a 'problem' restricted to the highincome countries of Europe, North America, Australia, New Zealand and Japan. There is a large and growing literature concerned with the economic consequences of population ageing. In this issue of 21st Century Society, four papers deal specifically with some of the economic consequences of population ageing in both high-and

2010

The main objective of this chapter is to study the impact of population aging on both public and private intergenerational transfers in Japan in the last two decades. The highlights of the chapter are the last two sections relating to: (a) population aging, (b) intergeneration transfers, (c) two demographic dividends and changing pattern of lifecycle defi cits, and (d) life cycle reallocations. The result from the last part is quite interesting. This chapter systematically elaborates the facts about a rapid demographic transition, and changes of social security expenditure and family support. Generally, many of us know that Japan has already moved into aging population, but this chapter shows how it had evolved.