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The Global Impact of Demographic Change

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  • Tim Callen
  • Warwick J. McKibbin
  • Nicoletta Batini

Abstract

The world is in the midst of a major demographic transition. This paper examines the implications of such transition over the next 80 years for Japan, the United States, other industrial countries, and the developing regions of the world using a dynamic intertemporal general equilibrium four-country model containing demographics calibrated to the "medium variant" of the United Nations population projections. We find that population aging in industrial countries will reduce aggregate growth in these regions over time, but should boost growth in developing countries over the next 20-30 years, as the relative size of their workingage populations increases. Demographic change will also affect saving, investment, and capital flows, implying changes in global trade balances and asset prices. We also explore the sensitivity of the results to assumptions about future productivity growth and country external risk for the developing country region.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 06/9.

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Length: 36
Date of creation: 01 Jan 2006
Date of revision:
Handle: RePEc:imf:imfwpa:06/9

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Keywords: Capital flows; Aging; Savings; Economic models; demographic change; demographic transition; population growth; life expectancy; adult population; labor force; mortality rate; demographics; pension; birthrate; working-age population; birthrates; age structure; population size; population projections; retirement; dependency ratio; birth; dependency ratios; public pension; demographic changes; world population; future income; working-age populations; age group; number of children; total population; labor income; public pension systems; births; pension systems; intergenerational transfers; transfer payments; life insurance; population structure; global population growth; private saving; demographic transitions; elderly population; nominal wage; demographic pressures; number of elderly; pension schemes; pension expenditures; retirement behavior; demographic effect; retirement age; low-fertility countries; demographic projections; ageing; aging populations; death of adults; domestic saving; bond rate; pension scheme; pension reforms; working age population; replacement rate; tax rate; demographic shifts; gains in life expectancy; young adults; long-term projections; replacement rates; insurance companies; public pension scheme; pension reform; demographic projection;

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References

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