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A global view on demographic pressure and labour market participation

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  • Groot, Loek
  • Peeters, Marga

Abstract

Demographic change across the globe puts pressure on labour markets and public finances. Most studies on ageing focus on the projected development of the old age dependency ratio, being the ratio of persons 65 or older relative to the working age population. This ratio gives a very incomplete picture of the (fiscal) pressure from demographic changes. In this study, besides the share of the dependent population composed of the young and the old, we also include the share of the working age population that is not active on the labour market, labelled as the labour market space. By analysing 21 developing and 29 developed economies across the globe, we cover 75% of the 9.3 billion people that the United Nations projects for the whole world in 2050. A new indicator, relating demographic pressure from fiscal spending to the available space at the labour market, enables us to quantify and compare the pressure-to-space across countries over the time span 2010-2050. The indicator points out that Poland, Turkey and Greece are most under pressure. Developing countries, such as Uganda, the Democratic Republic of Congo and Tanzania will experience a very low pressure up to 2050 in case their fiscal spending per young and elderly person remains at the current levels. In most of the countries under high pressure there seems to be room for using the labour market space by, for instance, working more hours or increasing the retirement age, as this will alleviate the fiscal pressure. This suggests a policy trade-off between maintaining publicly financed services to the dependent population and maintaining labour market space.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 32057.

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Date of creation: 06 Jul 2011
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Handle: RePEc:pra:mprapa:32057

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Keywords: demography; dependency rates; labour market; unemployment; social security; pensions; government spending;

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References

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  1. Robin Brooks, 2000. "What Will Happen to Financial Markets When the Baby Boomers Retire?," IMF Working Papers 00/18, International Monetary Fund.
  2. A. Lans Bovenberg, 2008. "The Life-course Perspective and Social Policies: An Overview of the Issues," CESifo Economic Studies, CESifo, vol. 54(4), pages 593-641, December.
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  7. Peeters, Marga, 2011. "Demographic pressure, excess labour supply and public-private sector employment in Egypt - Modelling labour supply to analyse the response of unemployment, public finances and welfare," MPRA Paper 31101, University Library of Munich, Germany.
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  9. Mohamed, Issam A.W., 2011. "Challenges of formal social security systems in Sudan," MPRA Paper 31611, University Library of Munich, Germany.
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  13. Peter Jarrett, 2011. "Pension Reforms in Poland and Elsewhere: the View from Paris," CASE Network Studies and Analyses 425, CASE-Center for Social and Economic Research.
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  17. Joel Mokyr, 2004. "Commentary : global demographic change : dimensions and economic significance," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, issue Aug, pages 57-71.
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  19. Ronald Lee & Sang-Hyop Lee & Andrew Mason, 2006. "Charting the Economic Life Cycle," NBER Working Papers 12379, National Bureau of Economic Research, Inc.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Gaan de Polen en Grieken straks van ons geld met pensioen?
    by Loek Groot, Marga Peeters in Me Judice on 2011-11-07 12:00:00
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Cited by:
  1. Peeters, Marga, 2012. "Asymmetric demographic pressure in South-Mediterranean versus North-Mediterranean economies and its impact on international gross capital flows," MPRA Paper 39635, University Library of Munich, Germany.
  2. Marga Peeters & Loek Groot, 2012. "Demographic Pressure in the European Union," EERI Research Paper Series EERI_RP_2012_11, Economics and Econometrics Research Institute (EERI), Brussels.
  3. Marga Peeters, 2011. "Modelling unemployment in the presence of excess labour supply," Journal of Economics and Econometrics, Economics and Econometrics Research Institute (EERI), Brussels, vol. 54(2), pages 58-92.
  4. Peeters, Marga, 2011. "“Better Safe than Sorry” - Individual Risk-free Pension Schemes in the European Union - Macroeconomic Benefits, the Mobile Working Citizen’s Perspective and Why Nots," MPRA Paper 33571, University Library of Munich, Germany.

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