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Income Growth in the 21st century : forecasts with an overlapping generations model

Author

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  • David, DE LA CROIX

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Department of Economics and CORE)

  • Frédéric DOCQUIER

    (FNRS and UNIVERSITE CATHOLIQUE DE LOUVAIN, Department of Economics)

  • Philippe, LIEGEOIS

    (CEPS, INSTEAD, Luxemburg)

Abstract

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.

Suggested Citation

  • David, DE LA CROIX & Frédéric DOCQUIER & Philippe, LIEGEOIS, 2007. "Income Growth in the 21st century : forecasts with an overlapping generations model," Discussion Papers (ECON - Département des Sciences Economiques) 2007029, Université catholique de Louvain, Département des Sciences Economiques.
  • Handle: RePEc:ctl:louvec:2007029
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    Cited by:

    1. de la Croix, David & Pierrard, Olivier & Sneessens, Henri R., 2013. "Aging and pensions in general equilibrium: Labor market imperfections matter," Journal of Economic Dynamics and Control, Elsevier, vol. 37(1), pages 104-124.
    2. Marchiori, Luca, 2011. "Demographic trends and international capital flows in an integrated world," Economic Modelling, Elsevier, vol. 28(5), pages 2100-2120, September.
    3. Luca Marchiori & Patrice Pieretti & Benteng Zou, 2011. "The Impact of Migration on Origin Countries: A Numerical Analysis," Dynamic Modeling and Econometrics in Economics and Finance, in: Herbert Dawid & Willi Semmler (ed.), Computational Methods in Economic Dynamics, pages 183-195, Springer.
    4. de la Croix, David & Pierrard, Olivier & Sneessens, Henri R., 2013. "Aging and pensions in general equilibrium: Labor market imperfections matter," Journal of Economic Dynamics and Control, Elsevier, vol. 37(1), pages 104-124.
    5. Lesly Cassin, 2018. "The effects of migration and pollution externality on cognitive skills in Caribbean economies: a Theoretical analysis," EconomiX Working Papers 2018-30, University of Paris Nanterre, EconomiX.
    6. Xavier Chojnicki & Frédéric Docquier & Lionel Ragot, 2011. "Should the US have locked heaven’s door?," Journal of Population Economics, Springer;European Society for Population Economics, vol. 24(1), pages 317-359, January.
    7. Zouhair Aït Benhamou & Lesly Cassin, 2018. "The effects of migration and remittances on development and capital in Caribbean Small Island Developing States," EconomiX Working Papers 2018-41, University of Paris Nanterre, EconomiX.
    8. Ignacio Mauleón, 2021. "Aggregated World Energy Demand Projections: Statistical Assessment," Energies, MDPI, vol. 14(15), pages 1-13, July.

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    More about this item

    Keywords

    Aging; Forecast; Computable General Equilibrium; Education; Experience;
    All these keywords.

    JEL classification:

    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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