nep-age New Economics Papers
on Economics of Ageing
Issue of 2011‒09‒16
twelve papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Implications of Population Aging for Economic Growth By David E. Bloom; David Canning; Günther Fink
  2. Why Does Population Aging Matter So Much for Asia? Population Aging, Economic Security and Economic Growth in Asia By Sang-Hyop LEE; Andrew MASON; Donghyun PARK
  3. Aging and Pensions in General Equilibrium: Labor Market Imperfections Matter By David de la Croix; Olivier Pierrard; Henri R. Sneessens
  4. Population Aging: Facts, Challenges, and Responses By David E. Bloom; Axel Boersch-Supan; Patrick McGee; Atsushi Seike
  5. Population Dynamics in India and Implications for Economic Growth By David E. Bloom
  6. Changing identity: Retiring from unemployment By Hetschko, Clemens; Knabe, Andreas; Schöb, Ronnie
  7. Population aging and endogenous economic growth By Klaus Prettner
  8. Long-Run Trends of Human Aging and Longevity By Holger Strulik; Sebastian Vollmer
  9. Essays on Labor Force Participation, Aging, Income and Health. By Knoef, M.G.
  10. The Future of South Asia: Population Dynamics, Economic Prospects, and Regional Coherence By David E. Bloom; Larry Rosenberg
  11. Demographic Change and Economic Growth in South Asia By David E. Bloom; David Canning; Larry Rosenberg
  12. Demographics and Development Policy By David E. Bloom; David Canning

  1. By: David E. Bloom (Harvard School of Public Health); David Canning (Harvard School of Public Health); Günther Fink (Harvard School of Public Health)
    Abstract: Between 2005 and 2050, the share of the population aged 60 and over is projected to increase in nearly every country in the world. Insofar as this shift will tend to lower both labor force participation and savings rates, it raises bona fide concerns about a future slowing of economic growth. These concerns apply to both developed and developing countries. An examination of past decades' data for OECD countries reveals that life expectancy has increased much faster than the legal age of retirement. Indications are similar in developing countries, which face the additional challenge of getting "old" before they get "rich". This paper analyses the implications of population aging for economic growth. Our main conclusion is that population aging poses challenges that are formidable, but not insurmountable.
    Keywords: population aging, economic growth, economic policy, labor force participation, life expectancy, retirement age
    Date: 2011–01
  2. By: Sang-Hyop LEE (Sang-Hyop LEE East West Center and University of Hawaii at Manoa, USA); Andrew MASON (Andrew MASON East West Center and University of Hawaii at Manoa, USA); Donghyun PARK (Donghyun PARK Economics and Research Department, Asian Development Bank, Philippines)
    Abstract: Asia as a whole is experiencing a rapid demographic transition toward older population structures. Within this broader region-wide trend, there is considerable heterogeneity, with different countries at different stages of the demographic transition. In this paper, we document Asia’s population aging, describe the region’s old-age support systems, and draw out the regional socioeconomic implications of population aging and old-age support systems. Population aging gives rise to two fundamental challenges for the region – (1) developing socioeconomic systems that can provide economic security to the growing number of elderly and (2) sustaining strong growth in the face of aging over the next few decades. Successfully addressing those two challenges will be vital for ensuring Asia’s continued economic success in the medium and long term.
    Date: 2011–08–01
  3. By: David de la Croix; Olivier Pierrard; Henri R. Sneessens
    Abstract: This paper re-examines the effects of population aging and pension reforms in an OLG model with labor market frictions. The most important feature brought about by labor market frictions is the connection between the interest rate and the unemployment rate. Exogenous shocks (such as aging) leading to lower interest rates also imply lower equilibrium unemployment rates, because lower capital costs stimulate labor demand and induce firms to advertize more vacancies. These effects may be reinforced by increases in the participation rate of older workers, induced by the higher wage rates and the larger probability of finding a job. These results imply that neglecting labor market frictions and employment rate changes may seriously bias the evaluation of pension reforms when they have an impact on the equilibrium interest rate.
    Keywords: Overlapping Generations, Search Unemployment, Labor Force Participation, Aging, Pensions, Labor Market
    JEL: E24 H55 J26 J64
    Date: 2011–07
  4. By: David E. Bloom (Harvard School of Public Health); Axel Boersch-Supan (Mannheim Research Institute for the Economics of Aging); Patrick McGee; Atsushi Seike
    Abstract: The world’s population is growing older, leading us into uncharted demographic waters. There will be higher absolute numbers of elderly people, a larger share of elderly, longer healthy life expectancies, and relatively fewer numbers of working-age people. There are alarmist views – both popular and serious – in circulation regarding what these changes might mean for business and economic performance. But the effects of population aging are not straightforward to predict. Population aging does raise some formidable and fundamentally new challenges, but they are not insurmountable. These changes also bring some new opportunities, because people have longer, healthier lives, resulting in extended working years, and different capacities and needs. The key is adaptation on all levels: individual, organizational, and societal. This article explores some potentially useful responses from government and business to the challenges posed by aging.
    Keywords: population, aging, longevity, fertility
    Date: 2011–05
  5. By: David E. Bloom (Harvard School of Public Health)
    Abstract: Demographic change in India is opening up new economic opportunities. As in many countries, declining infant and child mortality helped to spark lower fertility, effectively resulting in a temporary baby boom. As this cohort moves into working ages, India finds itself with a potentially higher share of workers as compared with dependents. If working-age people can be productively employed, India's economic growth stands to accelerate. Theoretical and empirical literature on the effect of demographics on labor supply, savings, and economic growth underpins this effort to understand and forecast economic growth in India. Policy choices can potentiate India's realization of economic benefits stemming from demographic change. Failure to take advantage of the opportunities inherent in demographic change can lead to economic stagnation.
    Keywords: age structure, China-India comparison, conditional convergence, demographic dividend, demographic transition, economic growth, economic growth in India, policy reform, population health, population of India
    Date: 2011–01
  6. By: Hetschko, Clemens; Knabe, Andreas; Schöb, Ronnie
    Abstract: Using data from the German Socio-Economic Panel from 1984-2009, we follow persons from their working life into their retirement years and find that, on average, employed people maintain their life satisfaction upon retirement, while long-term unemployed people report a substantial increase in their life satisfaction when they retire. These results are robust to controlling for changes in other life circumstances and suggest that retiring is associated with a switch in the relevant social norms that causes an increase in identity utility for the formerly unemployed. This is supportive of the idea that, by including identity in the utility function, results from the empirical life satisfaction literature can be reconciled with the economic theory of individual utility. --
    Keywords: life satisfaction,retirement,unemployment,identity,social norm
    JEL: I31 J26
    Date: 2011
  7. By: Klaus Prettner (Harvard Center for Population and Development Studies)
    Abstract: This article investigates the consequences of population aging for long-run economic growth perspectives. We introduce age specific heterogeneity of households into a model of research and development (R&D) based technological change. We show that the framework incorporates two standard specifications as special cases: endogenous growth models with scale eects and semi-endogenous growth models without scale effects. The introduction of an age structured population implies that aggregate laws of motion for capital and consumption have to be obtained by integrating over different cohorts. It is analytically shown that these laws of motion depend on the underlying demographic assumptions. Our results are that (i) increases in longevity have positive effects on per capita output growth, (ii) decreases in fertility have negative effects on per capita output growth, (iii) the longevity effect dominates the fertility eect in case of endogenous growth models and (iv) population aging fosters long-run growth in endogenous growth models, while the converse holds true in semiendogenous growth frameworks.
    Keywords: population aging, endogenous technological change, longrun economic growth
    Date: 2011–07
  8. By: Holger Strulik; Sebastian Vollmer (Harvard Center for Population and Development Studies)
    Abstract: Over the last 200 years humans experienced a huge increase of life expectancy. These advances were largely driven by extrinsic improvements of their environment (for example, the available diet, disease prevalence, vaccination, and the state of hygiene and sanitation). In this paper we ask whether future improvements of life-expectancy will be bounded from above by human life-span. Life-span, in contrast to life-expectancy, is conceptualized as a biological measure of longevity driven by the intrinsic rate of bodily deterioration. In order to pursue our question we first present a modern theory of aging and show that immutable life-span would put an upper limit on life-expectancy. We then show for a sample of developed countries that human life-span thus defined was indeed constant until the 1950s but increased since then by about eight years in sync with life-expectancy. In other words, we find evidence for manufactured life-span.
    Keywords: human life-span, life-expectancy, aging, compression of mortality, life-span extension
    Date: 2011–08
  9. By: Knoef, M.G. (Universiteit van Tilburg)
    Date: 2011
  10. By: David E. Bloom (Harvard School of Public Health); Larry Rosenberg (Harvard School of Public Health)
    Abstract: What do we foresee for South Asia in 2060, in light of the significant changes it has undergone in the past few decades? India has experienced rapid economic growth, but continues to suffer widespread, extreme poverty as well. Afghanistan, Nepal, and Sri Lanka have seen major conflicts, with Pakistan always seeming on the verge of a major eruption. Nepal and Sri Lanka finally seem to have moved toward peace. As elsewhere, the region's many developments and crosscurrents make reliable predictions difficult, but one relatively neglected set of factors – demographic change – may shed some light on the region's future. Throughout the world, falling mortality rates and declining birth rates have been predictive of growing per-capita incomes, and theoretical reasoning and related evidence are sufficiently compelling to think that the links may indeed be causal. In this vein, this essay explores South Asia's economic prospects through a demographic lens. In addition, as we will see, there are some similar demographic trends across the countries of South Asia, but there are also a number of extreme differences. Regional heterogeneity bears on the question, "to what extent is South Asia a coherent region?"
    Keywords: South Asia, demographic change, economic prospects, demographic trends, regional heterogeneity
    Date: 2011–02
  11. By: David E. Bloom (Harvard School of Public Health); David Canning (Harvard School of Public Health); Larry Rosenberg (Harvard School of Public Health)
    Abstract: Identifying factors that influence the pace of national economic growth is a time-worn activity of economists. Strangely, demographic change has often been absent from consideration. But new thinking and evidence have highlighted the powerful contribution that demographic change can make to economic growth, and this line of inquiry has some salient implications for understanding past growth in South Asia and assessing and shaping its future prospects.
    Keywords: economic growth, South Asia, demographic change
    Date: 2011–02
  12. By: David E. Bloom (Harvard School of Public Health); David Canning (Harvard School of Public Health)
    Abstract: By late 2011 there will be more than 7 billion people in the world, with 8 billion in 2025 and 9 billion before 2050. New technologies and institutions, and a lot of hard work have enabled us to avoid widespread Malthusian misery. Global income per capita has increased 150% since 1960, outpacing the growth of population. But we cannot be sure that incomes will continue to grow. One major difference is that now the world has a much larger population to support and, more notably, nearly all of the population increase that is projected in the coming decades will occur in the most politically, socially, and economically fragile countries. Fortunately, important insights into this demographic challenge have emerged in the past 10 years. Most important is that the rate of population growth is not the only demographic variable with consequences for economic growth and development: the age structure of the population is also fundamentally important.
    Keywords: demography, development, growth, demographic transition
    Date: 2011–01

This nep-age issue is ©2011 by Claudia Villosio. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.