nep-dem New Economics Papers
on Demographic Economics
Issue of 2019‒10‒07
six papers chosen by
Héctor Pifarré i Arolas
Universitat Pompeu Fabra

  1. Should I Care or Should I Work? The Impact of Working in Older Age on Caregiving By Carrino, L.;; Nafilyan, V.;; Avendaño Pabon, M.;
  2. Demographic Aging, Industrial Policy, and Chinese Economic Growth By Michael Dotsey
  3. Population Aging and Structural Transformation By Javier Cravino; Andrei A. Levchenko; Marco Rojas
  4. Declining Dynamism, Increasing Markups and Missing Growth: The Role of the Labor Force By Michael Peters; Conor Walsh
  5. Demographic Effects on the Impact of Monetary Policy By John V. Leahy; Aditi Thapar
  6. More Gray, More Volatile? Aging and (Optimal) Monetary Policy By Daniel Baksa; Zsuzsa Munkacsi

  1. By: Carrino, L.;; Nafilyan, V.;; Avendaño Pabon, M.;
    Abstract: This paper examines the impact of an increase in labour supply on women’s informal caregiving, due to changes in pension rules. We exploit a unique reform that increased the female State-Pension-Age (SPA) in the UK for up to 6 years. Using an instrumental variable approach to account for the endogeneity of labour supply, we show that an increase in employment substantially reduces the intensity of informal care: working for 30 hours/week reduces care-intensity by 6.6 hours/week, and reduces the probability of providing intensive care (> 20 hours/week) by 4 percentage points. We show that these effects are concentrated among women working in physically and psychologically demanding jobs. Our results provide evidence that increasing women’s labour supply in older age by raising the statutory age of retirement may decrease the intensity of informal care, which raises concerns about the availability of informal care in ageing populations.
    Keywords: informal care; retirement; labour supply; pension reform;
    JEL: J14 J22 J26 H55
    Date: 2019–10
  2. By: Michael Dotsey (Federal Reserve Bank of Philadelphia)
    Abstract: We examine the role of demographics and changing industrial policies in accounting for the rapid rise in household savings and in per capita output growth in China since the mid 1970s. The demographic changes come from reductions in the fertility rate and increases in the life expectancy, while the industrial policies take many forms. These policies cause important structural changes; first benefiting private labor-intensive firms by incentivizing them to increase their share of Chinese output, and later on benefiting capital-intensive firms resulting in an increase the share of capital devoted to heavy industries. We conduct our analysis in a general equilibrium economy that also features endogenous human capital investment. We calibrate the model to match key economic variables of the Chinese economy and show that demographic changes and industrial policies both contributed to increases in savings and output growth but with differing intensities and at different horizons. We further demonstrate the importance of endogenous human capital investment in accounting for the economic growth in China.
    Date: 2019
  3. By: Javier Cravino; Andrei A. Levchenko; Marco Rojas
    Abstract: We propose and quantify a novel mechanism behind the structural transformation process: older individuals devote a larger share of their expenditures to services, so the relative size of the service sector grows as the population ages. We document that for a large sample of countries, increases in population age are accompanied by the rise in the relative size of the service sector. We use household-level data from the US Consumer Expenditure Survey to show that the fraction of expenditures devoted to services increases with household age. We use a shift-share decomposition and a quantitative model to show that changes in the US population age distribution accounted for about a fifth of the increase in the share of services in consumption expenditures observed between 1982 and 2016. In our quantitative model, population aging plays a much larger role than changes in real income in accounting for the structural change observed in the US during this period.
    JEL: E2 O1 O4
    Date: 2019–09
  4. By: Michael Peters (Yale University); Conor Walsh (Yale University)
    Abstract: A growing body of empirical research highlights substantial changes in the US economy during the last three decades. Business dynamism – namely job reallocation, firm entry and creative destruction – is declining. Market power, as measured by markups and industry concentration, seems to be on the rise. Aggregate productivity growth is sluggish. We show that declines in the rate of growth of the labor force can qualitatively account for all of these features in a standard model of firm-dynamics. Despite its richness we can characterize the link between population growth and dynamism, markups and growth analytically. When we calibrate the model to the universe of U.S. Census data, the labor force channel can explain a large fraction of the aggregate trends.
    Date: 2019
  5. By: John V. Leahy; Aditi Thapar
    Abstract: We study whether the effects of monetary policy are dependent on the demographic structure of the population. We exploit cross-sectional variation in the response of US states to an identified monetary policy shock. We find that there are three distinct age groups. In response to an increase in interest rates, the responses of private employment and personal income are weaker the greater the share of population under 35 years of age, are stronger the greater the share between 40 and 65 years of age, and are relatively unaffected by the share older than 65 years. We find that all age groups become more responsive to monetary policy shocks when the proportion of middle aged increases. We provide evidence consistent with middle aged entrepreneurs starting and expanding businesses in response to an expansionary monetary shock.
    JEL: E32 E52 J11
    Date: 2019–09
  6. By: Daniel Baksa; Zsuzsa Munkacsi
    Abstract: The evidence on the inflation impact of aging is mixed, and there is no evidence regarding the volatility of inflation. Based on advanced economies’ data and a DSGE-OLG model, we find that aging leads to downward pressure on inflation and higher inflation volatility. Our paper is also the first, using this framework, to discuss how aging affects the transmission channels of monetary policy. We are also the first to examine aging and optimal central bank policies. As aging redistributes wealth among generations and the labor force becomes more scarce, our model suggests that aging makes monetary policy less effective and in more gray societies central banks should react more strongly to nominal variables.
    Date: 2019–09–20

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