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Demographics, Immigration, and Market Size

Author

Listed:
  • Koichi Fukumura

    (JSPS Research Fellow, Osaka University)

  • Kohei Nagamachi

    (The Graduate School of Management, Kagawa University)

  • Yasuhiro Sato

    (Faculty of Economics, The University of Tokyo)

  • Kazuhiro Yamamoto

    (Graduate School of Economics, Osaka University)

Abstract

This paper constructs an overlapping generations model wherein people decide their number of children and levels of consumption for di¤erentiated goods. We further assume that immigration takes place according to the utility di¤erence between inside and outside a country. We show that an improvement in longevity has three e¤ects on the market size and welfare: First, it decreases the number of children. Second, it increases the per capita expenditure on consumption. Finally, it increases immigration. The …rst e¤ect has negative impacts on the market size and welfare whereas the latter two e¤ects have positive impacts. We then calibrate our model to match Japanese and U.S. data from 1955 to 2014 and …nd that the negative e¤ects dominate the positive ones. Moreover, our counterfactual analyses show that accepting immigration in Japan can be useful in overcoming population and market shrinkage caused by an aging population.

Suggested Citation

  • Koichi Fukumura & Kohei Nagamachi & Yasuhiro Sato & Kazuhiro Yamamoto, 2017. "Demographics, Immigration, and Market Size," CIRJE F-Series CIRJE-F-1059, CIRJE, Faculty of Economics, University of Tokyo.
  • Handle: RePEc:tky:fseres:2017cf1059
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