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Income growth in the 21st century: Forecasts with an overlapping generations model

  • DE LA CROIX, David
  • DOCQUIER, Frédéric
  • LIEGEOIS, Philippe

We forecast income growth over the periode 2000-2050 in the US, Canada, and France. To ground the forecasts on relationships that are as robust as possible t changes in the environment, we use a quantitative theoretical approach which consists in calibrating and simulating a general equilibrium model. Compared to existing studies to link taxes and public expenditures to demographic changes, and take into account the interaction between education and work experience. Forecasts show that growth will be weaker over the period 2010-2040. The gap between the US and the two other countries is increasing over time. France will catch-up and overtake Canada in 2020. Investigating alternative policy scenarios, we show that increasing the effective retirement age to 63 would be most profitable for France, reducing its gap with US by one third. A decrease in social security benefits would slightly stimulate growth but would have no real impact on the gap between the countries.

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File URL: http://dx.doi.org/10.1016/j.ijforecast.2007.07.003
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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers RP with number -1989.

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Handle: RePEc:cor:louvrp:-1989
Note: In : International Journal of Forecasting, 23, 621-635, 2007
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