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Income Growth in the 21st century : forecasts with an overlapping generations model

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Author Info
David, DE LA CROIX () (UNIVERSITE CATHOLIQUE DE LOUVAIN, Department of Economics and CORE)
Frédéric DOCQUIER () (FNRS and UNIVERSITE CATHOLIQUE DE LOUVAIN, Department of Economics)
Philippe, LIEGEOIS (CEPS, INSTEAD, Luxemburg)

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Abstract

We forecast income growth over the periode 2000-2050 in the US, Canada, and France. To ground the forecasts on relationships that are as robust as possible t changes in the environment, we use a quantitative theoretical approach which consists in calibrating and simulating a general equilibrium model. Compared to existing studies to link taxes and public expenditures to demographic changes, and take into account the interaction between education and work experience. Forecasts show that growth will be weaker over the period 2010-2040. The gap between the US and the two other countries is increasing over time. France will catch-up and overtake Canada in 2020. Investigating alternative policy scenarios, we show that increasing the effective retirement age to 63 would be most profitable for France, reducing its gap with US by one third. A decrease in social security benefits would slightly stimulate growth but would have no real impact on the gap between the countries.

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Publisher Info
Paper provided by Université catholique de Louvain, Département des Sciences Economiques in its series Université catholique de Louvain, Département des Sciences Economiques Working Paper with number 2007029.

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Length: 36
Date of creation: 29 Sep 2007
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Handle: RePEc:ctl:louvec:2007029

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Related research
Keywords: Aging Forecast Computable General Equilibrium Education Experience

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Find related papers by JEL classification:
D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends and Forecasts
O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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