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Aging and the Macroeconomy

Author

Listed:
  • Juan Carlos Conesa

    (Stony Brook University)

  • Akshar Saxena

    (Harvard University)

  • Daniela Costa

    (Wharton)

  • Gajendran Raveendranathan

    (McMaster University)

  • Parisa Kamali

    (University of Minnesota)

  • Timothy Kehoe

    (University of Minnesota)

Abstract

This paper develops an overlapping generations model to study the macroeconomic implications of an aging population. We calibrate the model along a transition path from 1950 to 2100 that features rising survival probabilities, an increasing share of college graduates, and rising healthcare costs. The aging of the population leads to increased government spending on Medicare, Medicaid, and Social Security benefits. We find that the increase in the share of college graduates compensates for most of the increase in government spending. Consequently, taxes will only have to rise by a few percentage points to balance the budget in the future even if the current eligibility criteria and benefit levels for social insurance programs are preserved.

Suggested Citation

  • Juan Carlos Conesa & Akshar Saxena & Daniela Costa & Gajendran Raveendranathan & Parisa Kamali & Timothy Kehoe, 2018. "Aging and the Macroeconomy," 2018 Meeting Papers 930, Society for Economic Dynamics.
  • Handle: RePEc:red:sed018:930
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    File URL: https://economicdynamics.org/meetpapers/2018/paper_930.pdf
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    1. Conesa, Juan Carlos & Costa, Daniela & Kamali, Parisa & Kehoe, Timothy J. & Nygard, Vegard M. & Raveendranathan, Gajendran & Saxena, Akshar, 2018. "Macroeconomic effects of Medicare," The Journal of the Economics of Ageing, Elsevier, vol. 11(C), pages 27-40.
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