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Quantifying the Effects of the Demographic Transition in Developing Economies

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  • Attanasio Orazio P.

    ()
    (University College London)

  • Kitao Sagiri

    ()
    (New York University)

  • Violante Giovanni L.

    ()
    (New York University)

Abstract

This paper evaluates quantitatively the impact of the observed demographic transition on aggregate variables (factor prices, saving rate, output growth), and on inter-generational welfare in developing economies. It does so by developing a large-scale two-region equilibrium overlapping generations model calibrated to the North (more developed countries) and the South (less developed countries). The paper highlights that the effects of the demographic trends for less developed regions may depend on the degree of international capital mobility and on the extent to which the large Pay-As-You-Go systems in place in the more developed world will be reformed.

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Bibliographic Info

Article provided by De Gruyter in its journal The B.E. Journal of Macroeconomics.

Volume (Year): 6 (2006)
Issue (Month): 1 (April)
Pages: 1-44

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Handle: RePEc:bpj:bejmac:v:advances.6:y:2006:i:1:n:2

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References

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  1. Axel Börsch-Supan & Alexander Ludwig & Joachim Winter, 2004. "Aging, Pension Reform, and Capital Flows: A Multi-Country Simulation Model," MEA discussion paper series 04064, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
  2. Laurence J. Kotlikoff & Kent Smetters & Jan Walliser, 1999. "Privatizing Social Security in the U.S. -- Comparing the Options," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(3), pages 532-574, July.
  3. Miles, David, 1999. "Modelling the Impact of Demographic Change upon the Economy," Economic Journal, Royal Economic Society, vol. 109(452), pages 1-36, January.
  4. Maurice Obstfeld & Kenneth S. Rogoff, 1996. "Foundations of International Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262150476, December.
  5. Storesletten, Kjetil, 1998. "Sustaining Fiscal Policy Through Immigration," Seminar Papers 664, Stockholm University, Institute for International Economic Studies.
  6. Kyung-Mook Lim & David N. Weil, 2003. "The Baby Boom and the Stock Market Boom," Scandinavian Journal of Economics, Wiley Blackwell, vol. 105(3), pages 359-378, 09.
  7. David E. Bloom & David Canning & Jaypee Sevilla, 2001. "Economic Growth and the Demographic Transition," NBER Working Papers 8685, National Bureau of Economic Research, Inc.
  8. Mendoza, Enrique G. & Razin, Assaf & Tesar, Linda L., 1994. "Effective tax rates in macroeconomics: Cross-country estimates of tax rates on factor incomes and consumption," Journal of Monetary Economics, Elsevier, vol. 34(3), pages 297-323, December.
  9. Robin Brooks, 2003. "Population Aging and Global Capital Flows in a Parallel Universe," IMF Staff Papers, Palgrave Macmillan, vol. 50(2), pages 3.
  10. Juan Carlos Conesa & Dirk Krueger, 1998. "Voiting on social security reform with heterogeneous agents," Working Papers in Economics 36, Universitat de Barcelona. Espai de Recerca en Economia.
  11. M De Nardi & S Imrohoroglu & TJ Sargent, 2001. "Saving and pension reform in general equilibrium models," Oxford Review of Economic Policy, Oxford University Press, vol. 17(1), pages 20-39, Spring.
  12. Robin Brooks, 2000. "What Will Happen To Financial Markets When The Baby Boomers Retire?," Computing in Economics and Finance 2000 92, Society for Computational Economics.
  13. Hans Fehr & Sabine Jokisch & Laurence J. Kotlikoff, 2005. "Will China Eat Our Lunch or Take Us Out to Dinner? Simulating the Transition Paths of the U.S., EU, Japan, and China," NBER Working Papers 11668, National Bureau of Economic Research, Inc.
  14. Mark Huggett & Gustavo Ventura, 1999. "On the Distributional Effects of Social Security Reform," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(3), pages 498-531, July.
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Citations

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Cited by:
  1. Mendoza, Enrique G & Quadrini, Vincenzo & Ríos-Rull, José-Víctor, 2007. "Financial Integration, Financial Deepness and Global Imbalances," CEPR Discussion Papers 6149, C.E.P.R. Discussion Papers.
  2. Tosun, Mehmet Serkan, 2008. "Endogenous fiscal policy and capital market transmissions in the presence of demographic shocks," Journal of Economic Dynamics and Control, Elsevier, vol. 32(6), pages 2031-2060, June.
  3. Attanasio Orazio P. & Gianluca Violante, 1999. "Global Demographic Trends and Social Security Reform," REVISTA DESARROLLO Y SOCIEDAD, UNIVERSIDAD DE LOS ANDES-CEDE.
  4. Krueger, Dirk & Ludwig, Alexander, 2006. "On the consequences of demographic change for rates of returns to capital, and the distribution of wealth and welfare," CFS Working Paper Series 2006/18, Center for Financial Studies (CFS).
  5. Michael Graff & Kam Ki Tang & Jie Zhang, 2008. "Demography, Financial Openness, National Savings and External Balance," KOF Working papers 08-194, KOF Swiss Economic Institute, ETH Zurich.
  6. Kam Ki Tang & Michael Graff & Jie Zhang, . "Macroeconomic Fluctuations in Emerging Economies: An Unobserved Components Approach," MRG Discussion Paper Series 4111, School of Economics, University of Queensland, Australia.
  7. Andrea Ferrero, 2007. "The long-run determinants of U.S. external imbalances," Staff Reports 295, Federal Reserve Bank of New York.
  8. Ferrero, Andrea, 2010. "A structural decomposition of the U.S. trade balance: Productivity, demographics and fiscal policy," Journal of Monetary Economics, Elsevier, vol. 57(4), pages 478-490, May.
  9. Axel H. Boersch-Supan & Alexander Ludwig, 2010. "Old Europe ages: Reforms and Reform Backlashes," NBER Working Papers 15744, National Bureau of Economic Research, Inc.
  10. Andrew Mason & Ronald Lee & Sang-Hyop Lee, 2010. "The Demographic Transition and Economic Growth in the Pacific Rim," NBER Chapters, in: The Economic Consequences of Demographic Change in East Asia, NBER-EASE Volume 19, pages 19-55 National Bureau of Economic Research, Inc.
  11. Hiroyuki Ito & Ken Tabata, 2010. "The spillover effects of population aging, international capital flows, and welfare," Journal of Population Economics, Springer, vol. 23(2), pages 665-702, March.
  12. Axel Börsch-Supan & Alexander Ludwig, 2009. "Living Standards in an Aging Germany: The Benefits of Reforms and the Costs of Resistance," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 229(2-3), pages 163-179, June.
  13. Steven F. Venti, 2010. "Comment on "Aging Populations, Pension Operations, Potential Economic Disappointment and Its Allocation"," NBER Chapters, in: Demography and the Economy, pages 326-331 National Bureau of Economic Research, Inc.
  14. Yvonne Adema & Lex Meijdam & Harrie Verbon, 2008. "Beggar thy thrifty neighbour," Journal of Population Economics, Springer, vol. 21(4), pages 933-959, October.

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