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Transmission of Demographic Shock Effects from Large to Small

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Author Info
Turalay Kenc (Birkbeck College, University of London, UK)
Serdar Sayan (Bilkent University, Ankara, Turkey)

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Abstract

This paper addresses an issue that has been overlooked in the literature on the effects of population ageing: Transmission onto small countries of the economic effects of population ageing, a natural, demographic outcome of the shock that many large industrial countries experienced in the form of a baby boom in the late 1940s and early 1950s. It is argued in the paper that international commodity and capital flows provide channels for the transmission of these effects that include changes in the terms of trade and interest rates in large countries. The issue is considered in the context of possible effects on Turkey of the demographic shock effects transmitted from Europe. The discussion is carried out in reference to the simulation results from an overlapping generations, general equilibrium model parametrised to mimic the current state of four largest members of the EU and Turkey. The simulation exercises lead to the following conclusions: First, changes in the age composition of Turkish population to occur in the course of the country’s own demographic transition will affect the time paths of consumption, savings, investment and output substantially. Secondly, when they are transmitted onto Turkey, the economic effects of baby boomers’ ageing in the EU will magnify the effects of the demographic transition in this country. This is a finding with implications for long term growth prospects of a country, and appears to be relevant to other small countries whose close economic ties with the industrial nations with ageing populations make them vulnerable to the effects of population ageing even if they have relatively young populations now.

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Publisher Info
Paper provided by EconWPA in its series GE, Growth, Math methods with number 9804001.

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Length: 20 pages
Date of creation: 01 Apr 1998
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Handle: RePEc:wpa:wuwpge:9804001

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Related research
Keywords: Demographic Shocks and Ageing Populations; Overlapping Generations; General Equilibrium; Simulation Models; Turkey and the EU.;

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Find related papers by JEL classification:
C68 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Computable General Equilibrium Models
F10 - International Economics - - Trade - - - General
F20 - International Economics - - International Factor Movements and International Business - - - General
F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
J10 - Labor and Demographic Economics - - Demographic Economics - - - General
J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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References listed on IDEAS
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Equipe INGENUE, 2001. "Macroeconomic consequences of pension reforms in Europe: an investigation with the INGENUE world model," CEPREMAP Working Papers (Couverture Orange) 0116, CEPREMAP. [Downloadable!]
  2. M. Aglietta & J. Chateau & J. Fayolle & M. Juillard & J. Le Cacheux & G. Legarrec & V. Touzé, 2002. "Macroeconomic consequences of pension reforms in Europe:," Computing in Economics and Finance 2002 216, Society for Computational Economics. [Downloadable!]
  3. INGENUE Team, 2001. "Macroeconomic Consequences of Pension Reforms in Europe: An Investigation with the INGENUE World Model," Working Papers 2001-17, CEPII research center. [Downloadable!]
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