The Developed World's Demographic Transition

Jokisch, Sabine  The Developed World's Demographic Transition. Implications for Fiscal Policy and the International Macroeconomy
2006. XVI, 231 pages. BtrFin 21

ISBN 978-3-16-148861-0
cloth € 84.00

Sabine Jokisch

The Developed World's Demographic Transition

Implications for Fiscal Policy and the International Macroeconomy

Due to a period of low fertility rates and at the same time steadily rising life expectancies, almost all industrialized countries are experiencing an enormous increase in the number of old people. Sabine Jokisch analyzes the fiscal and macroeconomic impact of population aging in the US, the EU and Japan within a dynamic general equilibrium model with overlapping generations. The findings are discouraging. In all three regions, the demographic transition leads to a dramatic increase in payroll tax rates which will hinder capital accumulation in the future. Wage rates are expected to decline, and real interest rates are on the rise. The study further simulates different reform proposals in order to analyze whether or not these could alleviate the demographic stresses. Changes in fertility and mortality have shown a very small impact on future economic development. Immigration could help the developed world to face its demographic dilemma only if it were possible to attract a large number of highly-skilled workers. Radical pension reforms, such as full privatization of the pension system, are most promising. They improve future fiscal development and increase the welfare of future generations.

 

Survey of contents:

1 Introduction and Outline of the Study

2 Background of the Study

2.1 The Demographic Development in the OECD between 1950 and 2050
2.2 The Economic Consequences of Aging Populations
2.3 Methodological Considerations

3 Fiscal Systems in the OECD Countries

3.1 Public Pension Systems
3.2 Health Care Systems
3.3 Taxation

4 Modeling the World Economy

4.1 Population Dynamics
4.2 The Structure of the Economic Model

5 Calibration and Numerical Solution of the Baseline Transition Path

5.1 Parametrization of the Model
5.2 Solving the Model
5.3 Initial Equilibria and the Closed Economies' Baseline Transition Paths
5.4 Initial Equilibrium and the World Economy's Baseline Transition Path

6 Interaction Between Demographic Changes and Economic Outcomes

6.1 The Impact of Fertility and Mortality Changes
6.2 Immigration Policies
6.3 Conclusions

7 Reform Options for Public Pension Systems

7.1 Pension Reforms in the Light of Aging Populations
7.2 Simulation Results of Pension Reforms
7.3 Conclusions

8 International Tax Policies

8.1 The Economic Impact of Capital Income Taxation
8.2 Simulation Results of International Tax Reforms
8.3 Conclusions

9 General Summary

Appendix
A.1 Important Indicators of the Population Model
A.2 Labor-Augmenting Technological Change in OLG Models
A.3 Calculation of Individual Consumption, Leisure and Children's Consumption
A.4 Derivation of the National Goods Market Equilibrium

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