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Population Aging and Its Economic Costs: A Survey of the Issues and Evidence

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  • Frank T. Denton
  • Byron G. Spencer

Abstract

The aging of the population is expected to result in substantial increases in the costs of maintaining health care and pension programs, and that is a source of widespread concern. However, a proper assessment requires that attention be given to all categories of government expenditure, including education and others associated with younger age groups, and not just those associated with the older population. It requires also that privately provided goods and services be considered, since their costs must be charged against the same national income as publicly provided ones. Beyond that, it is important to recognize that population change affects not only the demand side of the economy, but also the supply side -- the economy's productive capacity. An important conclusion is that while other influences will no doubt play a role, demographic effects by themselves are likely to cause government expenditure (all categories, all levels of government combined) to increase by no more than the rate of growth of the population, and by less than the rate of growth of the gross domestic product. Taking public and private costs together, and assigning appropriate weights to different age groups, the overall "dependency ratio" can be expected to remain at its current low level for another decade and a half or two decades, and then to rise as the baby boom generation retires in large numbers. However, the projected future ratio never reaches the levels of the 1950s and 1960s. Although the overall "burden" of population aging is manageable, major adjustments will be required in the coming decades, especially in the area federal/provincial cost sharing. For the most part, though, the effects of population aging are predictable, slow, and some time off.

Suggested Citation

  • Frank T. Denton & Byron G. Spencer, 1999. "Population Aging and Its Economic Costs: A Survey of the Issues and Evidence," Social and Economic Dimensions of an Aging Population Research Papers 1, McMaster University.
  • Handle: RePEc:mcm:sedapp:1
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    References listed on IDEAS

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    Cited by:

    1. Denton, Frank T. & Gafni, Amiram & Spencer, Byron G., 2002. "Exploring the effects of population change on the costs of physician services," Journal of Health Economics, Elsevier, vol. 21(5), pages 781-803, September.
    2. Frank T. Denton & Byron G. Spencer, 2003. "Population Change and Economic Growth: The Long-Term Outlook," Social and Economic Dimensions of an Aging Population Research Papers 102, McMaster University.
    3. Stiller, Silvia, 2000. "Welfare effects of demographic changes in a Ramsey growth model," HWWA Discussion Papers 107, Hamburg Institute of International Economics (HWWA).
    4. Hwai-Hui Fu & Dennis Lin & Hsien-Tang Tsai & Duan Wei, 2009. "Applying lot-by-lot double sampling plan to reform Taiwan National Health Insurance auditing system," Quality & Quantity: International Journal of Methodology, Springer, vol. 43(4), pages 571-584, July.
    5. Paul V. Grootendorst & Michael R. Veall, 2005. "National Catastrophic Drug Insurance Revisited: Who Would Benefit from Senator Kirby's Recommendations?," Canadian Public Policy, University of Toronto Press, vol. 31(4), pages 341-358, December.
    6. Frank T. Denton & Byron G. Spencer, 2008. "What is Retirement? A Review and Assessment of Alternative Concepts and Measures," Social and Economic Dimensions of an Aging Population Research Papers 231, McMaster University.
    7. Ralf Kronberger, 2005. "Welche Bedeutung hat eine alternde Bevölkerung für das österreichische Steueraufkommen?," Vienna Yearbook of Population Research, Vienna Institute of Demography (VID) of the Austrian Academy of Sciences in Vienna, vol. 3(1), pages 197-218.
    8. Paula C. Albuquerque & João C. Lopes, 2010. "Economic impacts of ageing: an inter-industry approach," International Journal of Social Economics, Emerald Group Publishing, vol. 37(12), pages 970-986, October.
    9. Malick Souare, 2003. "Macroeconomic Implications of Population Aging and Public Pensions," Social and Economic Dimensions of an Aging Population Research Papers 100, McMaster University.
    10. Stephen Birch & George Kephart & Gail Tomblin-Murphy & Linda O'Brien-Pallas & Rob Alder & Adrian MacKenzie, 2007. "Human Resources Planning and the Production of Health: A Needs-Based Analytical Framework," Canadian Public Policy, University of Toronto Press, vol. 33(s1), pages 1-16, January.
    11. Zhang, Junsen & Zhang, Jie & Lee, Ronald, 2001. "Mortality decline and long-run economic growth," Journal of Public Economics, Elsevier, vol. 80(3), pages 485-507, June.

    More about this item

    Keywords

    aging; dependency ratio;

    JEL classification:

    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination

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