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on Demographic Economics |
| By: | Thomas Cooley (New York University); Edwin Nusbaum (University of California, Santa Barbara); Espen Henriksen (University of California, Davis) |
| Abstract: | Since the early 1990’s there have been persistent slowdowns in the growth rates of the four largest European economies: France, Germany, Italy, and the United Kingdom. This persistence suggests a low-frequency structural change is at work. Aging populations, both in terms of longer individual life expectancies and declining fertility have caused a shift in the age-cohort distribution. Growth accounting identifies the following five sources of economic growth: total factor productivity, capital accumulation, labor supply on the intensive and extensive margin, and population growth. Changing demographics affect all these five margins. The effects of aging populations on economic growth are also exacerbated by the pension systems in place. In order to fund increasing liabilities with a shrinking tax base, tax rates must increase to balance budgets. This will impose distortions to individual factor-supply choices, providing further headwinds for economic growth. We quantify the additional growth effects resulting from these distortions. |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed019:1352&r=all |
| By: | Adrien Auclert (Stanford); Frederic Martenet (Stanford University); Hannes Malmberg (University of Minnesota) |
| Abstract: | Macroeconomists agree that population aging is likely to reduce equilibrium real interest rates. However, there is disagreement regarding the magnitude of this effect, and the mechanisms through which it operates. In this paper, we reconsider the pressure of demographic change on interest rates. Using a rich overlapping generation model, we show that this effect can be expressed as a function of a few interpretable elasticities. We calculate some of these elasticities directly using empirical age-wealth profiles and projected population age distributions. Our results suggest that, if interest rates were to remain constant, the twenty-first century would see a very large increase in the wealth-to-GDP ratios of rich countries. We use our decomposition framework to guide our calibration of the remaining parameters of our model and to bound the decline in equilibrium interest rates we should expect from this phenomenon. |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed019:952&r=all |
| By: | Margherita Borella (Unversity of Torino); Fang Yang (Louisiana State University); Mariacristina De Nardi (UCL, Federal Reserve Bank of Chicago, CE) |
| Abstract: | In the U.S., both taxes and old age Social Security benefits depend on one's marital status and tend to discourage the labor supply of the secondary earner. To what extent are these provisions holding back female labor supply? We estimate a rich life-cycle model of labor supply and savings for couples and singles using the Method of Simulated Moments (MSM) on the 1945 and 1955 birth-year cohorts and we use it to evaluate what would happen without these provisions. Our model matches well the life cycle profiles of labor market participation, hours, and savings for married and single people and generates plausible elasticities of labor supply. Eliminating marriage-related provisions drastically increases the participation of married women over their entire life cycle, reduces the participation of married men after age 55, and increases the savings of couples in both cohorts, including in the later one, which has similar participation to that of more recent generations. |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed019:917&r=all |
| By: | Schön, Matthias; Stähler, Nikolai |
| Abstract: | In a three-region New Keynesian life-cycle model calibrated to Germany, the Euro area (without Germany) and the rest of the world, we analyze the impact of population ageing on net foreign asset and current account developments. Using unsynchronized demographic trends by taking those of Germany as given and assuming constant population everywhere else, we are able to generate German current account surpluses of up to 15% of GDP during the first half of this century. However, projected demographic trends from 2000 to 2080 in OECD countries (and China in an additional analysis) are much more synchronized. Feeding these into our model suggests that the average annual German current account surplus from 2000 to 2018 that should be attributed to ageing reduces to around 2.83% (1.23%) of GDP, with a maximum at 4.3% (2.7%) in 2006 (when taking into account China), turning negative around 2035. |
| Keywords: | Population Ageing,Net Foreign Assets,Global Imbalances,DSGE Models |
| JEL: | E43 E44 E52 E58 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bubdps:332019&r=all |
| By: | Anthony Edo (CEPII.); Jacques Melitz (CREST; CEPII.) |
| Abstract: | We perform the first econometric test to date of the influences of inflows of precious metals and population growth on the “Great Inflation” in Europe following the discovery of the New World. The English evidence strongly supports the near-equivalent importance of both influences. For 1500-1700, silver is the only relevant precious metal in the estimates. The study controls for urbanization, government spending, mortality crises and climatic changes. The series for inflows of the precious metals into Europe from America and European mining are newly constructed based on the secondary sources. |
| Keywords: | The Great Inflation, Demography, Precious metals, European economic history 1500-1700 |
| JEL: | E31 F00 J10 N13 N33 |
| Date: | 2019–09–01 |
| URL: | http://d.repec.org/n?u=RePEc:crs:wpaper:2019-14&r=all |
| By: | Pauline Rossi (University of Amsterdam); Mathilde Godard (CNRS) |
| Abstract: | The old-age security motive for fertility postulates that people's needs for old-age support raise the demand for children. We test this widespread idea using the extension of social pensions in Namibia during the nineties. The reform eliminated inequalities in pension coverage and benefit across regions and ethnic groups. Combining differences in pre-reform pensions and dfferences in exposure across cohorts, we show that pensions substantially reduce fertility, especially in late reproductive life. This article provides the first quasi-experimental quantification of the old-age security motive. The results suggest that improving social protection for the elderly could go a long way in fostering fertility decline in Sub-Saharan Africa. |
| Keywords: | Fertility, Old-age pensions, Social security, Africa, Difference-in-differences |
| JEL: | H55 I38 J13 O15 O55 |
| Date: | 2019–09–20 |
| URL: | http://d.repec.org/n?u=RePEc:tin:wpaper:20190069&r=all |