nep-dem New Economics Papers
on Demographic Economics
Issue of 2024‒03‒25
three papers chosen by
Héctor Pifarré i Arolas, University of Wisconsin

  1. Long Term Care Risk for Couples and Singles By Elena Capatina; Gary Hansen; Minchung Hsu
  2. Immigrant Diversity and Long-Run Development By Luigi Minale; Rudi Rocha; Bruno Vigna
  3. Demographic aging and long-run economic growth in Germany By Ochsner, Christian; Other, Lars; Thiel, Esther; Zuber, Christopher

  1. By: Elena Capatina; Gary Hansen; Minchung Hsu
    Abstract: This paper compares the impact of long term care (LTC) risk on single and married households and studies the roles played by informal care (IC), consumption sharing within households, and Medicaid in insuring this risk. We develop a life-cycle model where individuals face survival and health risk, including the possibility of becoming highly disabled and needing LTC. Households are heterogeneous in various important dimensions including education, productivity, and the age difference between spouses. Health evolves stochastically. Agents make consumption-savings decisions in a framework featuring an LTC state-dependent utility function. We find that household expenditures increase significantly when LTC becomes necessary, but married individuals are well insured against LTC risk due to IC. However, they still hold considerable assets due to the concern for the spouse who might become a widow/widower and can expect much higher LTC costs. IC significantly reduces precautionary savings for middle and high income groups, but interestingly, it encourages asset accumulation among low income groups because it reduces the probability of means-tested Medicaid LTC.
    JEL: D16 E21 H31 J14
    Date: 2024–03
  2. By: Luigi Minale (Universidad Carlos III de Madrid); Rudi Rocha (São Paulo School of Business Administration, Getulio Vargas Foundation); Bruno Vigna (BNDES)
    Abstract: The article investigates the long-term economic effects of immigrant diversity. Focusing on the large immigration wave experienced by Brazil at the turn of the twentieth century, we ask whether municipalities in the State of São Paulo that received a population of immigrants characterized by a more diverse mix of origin countries ended up having better long-term economic outcomes. To identify causal effects, we leverage on unique historical individual-level data in immigrants arriving in São Paulo between 1880 and 1920, and develop an instrumental variable strategy that combines time variation in the composition of immigrants arriving from overseas with the timing of the railway network expansion in the state. We find that a one standard deviation increase in accumulated immigrant diversity in 1920 is associated with a 7-8% higher income per capita in 2000. This effect is economically relevant and robust to various identification tests. Furthermore, when exploring the mechanisms through which immigrant diversity affected long-term development, we document that municipalities that hosted more a more diverse pool of immigrants experienced (i) larger proportions of employment in manufacturing and services as well as greater occupational diversity within manufacturing in the long-term; (ii) higher investment in public goods, as measured by municipal spending on education; (iii) and higher education outputs in the long-run.
    Keywords: birthplace diversity, immigration, long-term development
    JEL: C36 N36 O15
    Date: 2024–03
  3. By: Ochsner, Christian; Other, Lars; Thiel, Esther; Zuber, Christopher
    Abstract: We study the long-run interaction between Germany's economic growth trajectory and demographic aging. Using a comprehensive dataset, we leverage the classical production function approach to estimate potential output growth between 1970 and 2070. We account for the inherent uncertainty in our projections using Bayesian estimation techniques. Overall, Germany's potential output growth up to 2070 will be low if current economic trends persist. In particular, the diminishing labor volume, coupled with sluggish total factor productivity and investment trend growth, contributes to the decline. Our results highlight the significance of demographic factors in shaping economic trajectories and the critical need for policy interventions to mitigate adverse effects. Our analysis can serve as valuable inputs for formulating long-term economic policies.
    Keywords: demographic aging, production function, potential output, Germany, long-run forecast, economic growth
    JEL: E13 E17 E23
    Date: 2024

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