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Fertility, mortality and the developed world's demographic transition

Author

Listed:
  • Fehr, Hans
  • Jokisch, Sabine
  • Kotlikoff, Laurence J.

Abstract

This study uses Fehr et al. [Fehr, H., Jokisch, S., & Kotlikoff, L. J. (2004a). The role of immigration in dealing with the developed world's demographic transition. FinanzArchiv, 60, 296-324; Fehr, H., Jokisch, S., & Kotlikoff, L. J. (2005). The developed world's demographic transition--the roles of capital flows, immigration, and policy. In R. Brooks & A. Razin (Eds.), Social security reform (pp. 11-43). Cambridge: Cambridge University Press] dynamic general equilibrium model to analyze the effects of changes in fertility and mortality on the developed world's demographic transition. The model features three regions - the U.S., Japan, and the EU-15 - and incorporates age- and time-specific fertility and mortality rates, detailed fiscal institutions, and international capital mobility, subject to adjustment costs. The model's life-cycle agents maximize expected utility taking into account the uncertainty of their dates of death. Since there is no altruism, bequests arise solely as a result of incomplete annuitization. The model fits the developed world's demographic, fiscal, and economic initial conditions quite closely. Our simulations show that, all else equal, higher fertility and lower mortality will, respectively, improve and worsen fiscal and economic conditions along the world's dynamic transition path. But we find that such demographic changes, even when very large in size and relatively quick in nature, would come too late to materially alter the fiscal and economic picture over most of this Century. Indeed, our simulations indicate only minor effects on the developed world's rather bleak baseline transition path prior to roughly 2070 arising from either major increases in fertility rates or major reductions in mortality rates. Although such changes have important long-run fiscal and economic effects, they occur too gradually to materially alter the short- and medium-term outcomes.

Suggested Citation

  • Fehr, Hans & Jokisch, Sabine & Kotlikoff, Laurence J., 2008. "Fertility, mortality and the developed world's demographic transition," Journal of Policy Modeling, Elsevier, vol. 30(3), pages 455-473.
  • Handle: RePEc:eee:jpolmo:v:30:y:2008:i:3:p:455-473
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    References listed on IDEAS

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    2. Melnikov, N.B. & O'Neill, B.C. & Dalton, M.G., 2012. "Accounting for household heterogeneity in general equilibrium economic growth models," Energy Economics, Elsevier, vol. 34(5), pages 1475-1483.
    3. George Kudrna & Chung Tran & Alan Woodland, 2015. "Facing Demographic Challenges: Pension Cuts or Tax Hikes," ANU Working Papers in Economics and Econometrics 2015-626, Australian National University, College of Business and Economics, School of Economics.
    4. Patrick GEORGES & Marcel MERETTE & Aylin SECKIN, "undated". "Should Canada Diversify its Trade Pattern? An Overlapping-Generations CGE Analysis of Trade and Ageing," EcoMod2009 21500036, EcoMod.
    5. Krzysztof Makarski & Joanna Tyrowicz, 2017. "On Welfare Effects of Increasing Retirement Age," GRAPE Working Papers 10, GRAPE Group for Research in Applied Economics.
    6. Chung Tran, 2014. "Temptation and Taxation with Elastic Labor," ANU Working Papers in Economics and Econometrics 2014-617, Australian National University, College of Business and Economics, School of Economics.
    7. repec:eee:hapoch:v1_713 is not listed on IDEAS
    8. Fehr, Hans, 2016. "CGE modeling social security reforms," Journal of Policy Modeling, Elsevier, vol. 38(3), pages 475-494.
    9. Rossana Merola & Douglas Sutherland, 2013. "Fiscal Consolidation and the Implications of Social Spending for Long-Term Fiscal Sustainability," Review of Economics and Institutions, Università di Perugia, vol. 4(3).
    10. Bodrova, Vera & Gvozdeva, Margarita & Kazakova, Maria, 2015. "Methods of Long-term Forecasting: Comparative Analysis and Foreign Experience of Applying," Published Papers 2310, Russian Presidential Academy of National Economy and Public Administration.
    11. Mario Catalan & Nicolas E Magud, 2012. "A Tradeoff between the Output and Current Account Effects of Pension Reform," IMF Working Papers 12/283, International Monetary Fund.
    12. Naito, Takumi & Zhao, Laixun, 2009. "Aging, transitional dynamics, and gains from trade," Journal of Economic Dynamics and Control, Elsevier, vol. 33(8), pages 1531-1542, August.
    13. repec:eee:hapoch:v1_179 is not listed on IDEAS
    14. Kazakova, Maria & Trunin, Pavel, 2015. "Long-Term Prognosis of Basic Demographic and Macroeconomic Indicators in Russia," Published Papers 2308, Russian Presidential Academy of National Economy and Public Administration.
    15. Lee, R., 2016. "Macroeconomics, Aging, and Growth," Handbook of the Economics of Population Aging, Elsevier.
    16. Hans Fehr & Sabine Jokisch, 2006. "Demographischer Wandel und internationale Finanzmärkte," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 7(4), pages 501-517, November.
    17. 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.
    18. Fernando Perera-Tallo, 2012. "Optimal Retirement Age and Aging Population," 2012 Meeting Papers 728, Society for Economic Dynamics.
    19. repec:kap:openec:v:28:y:2017:i:4:d:10.1007_s11079-016-9429-5 is not listed on IDEAS
    20. Kazakova, Maria & Nesterova, Kristina, 2015. "Long-Term Forecast of the Main Parameters of the Budgetary System of Russia," Published Papers 2309, Russian Presidential Academy of National Economy and Public Administration.
    21. Knell, Markus, 2013. "The Intergenerational Distribution of Demographic Fluctuations in Unfunded and Funded Pension Systems," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79830, Verein für Socialpolitik / German Economic Association.
    22. Kudrna, George & Tran, Chung & Woodland, Alan, 2015. "The dynamic fiscal effects of demographic shift: The case of Australia," Economic Modelling, Elsevier, vol. 50(C), pages 105-122.

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