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Economic policy implications of world demographic change

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  • Richard Johnson

Abstract

Demographic changes over the next 50 years will affect the world economy in many ways. Some of these effects will be beneficial. In developing countries, for example, falling birthrates will enable women to supply more paid labor and families to invest more in the education of each child. Other demographic changes will cause economic problems. In developed countries, population aging is likely to imply government pension systems cannot continue with their current rules. Population growth in developing countries could also change patterns of world trade and thereby reduce the wages of some workers in developed countries. ; Economists have argued that policy changes are needed to maximize the rewards of some demographic changes and reduce the negative impacts of others. For example, governments of developing countries may need to create more flexible labor markets if their increased female workforce is to find employment. The governments of many developed countries need to plan how much they will support the high number of retirees expected in the future and communicate this plan to workers. ; Johnson describes aspects of predicted world demographic changes that are likely to pose challenges for economic policy and explores how policy could react to these changes. He concludes that the economic effects of such changes will depend heavily on future government policy. In particular, the effect of population growth in developing countries will depend on whether their governments’ policies encourage economic growth. Government policy in developed countries will affect the size and distribution of problems created by population aging but will not be able to remove these problems altogether.

Suggested Citation

  • Richard Johnson, 2004. "Economic policy implications of world demographic change," Economic Review, Federal Reserve Bank of Kansas City, issue Q I, pages 39-64.
  • Handle: RePEc:fip:fedker:y:2004:i:qi:p:39-64:n:v.89no.1
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    Cited by:

    1. 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.

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    Keywords

    Economic policy ; Demography;

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