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Transmission of Demographic Shock Effects from Large to Small

  • Turalay Kenc

    (Birkbeck College, University of London, UK)

  • Serdar Sayan

    (Bilkent University, Ankara, Turkey)

This paper addresses an issue that has been overlooked in the literature on the effects of population ageing: Transmission onto small countries of the economic effects of population ageing, a natural, demographic outcome of the shock that many large industrial countries experienced in the form of a baby boom in the late 1940s and early 1950s. It is argued in the paper that international commodity and capital flows provide channels for the transmission of these effects that include changes in the terms of trade and interest rates in large countries. The issue is considered in the context of possible effects on Turkey of the demographic shock effects transmitted from Europe. The discussion is carried out in reference to the simulation results from an overlapping generations, general equilibrium model parametrised to mimic the current state of four largest members of the EU and Turkey. The simulation exercises lead to the following conclusions: First, changes in the age composition of Turkish population to occur in the course of the country’s own demographic transition will affect the time paths of consumption, savings, investment and output substantially. Secondly, when they are transmitted onto Turkey, the economic effects of baby boomers’ ageing in the EU will magnify the effects of the demographic transition in this country. This is a finding with implications for long term growth prospects of a country, and appears to be relevant to other small countries whose close economic ties with the industrial nations with ageing populations make them vulnerable to the effects of population ageing even if they have relatively young populations now.

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Paper provided by EconWPA in its series GE, Growth, Math methods with number 9804001.

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Length: 20 pages
Date of creation: 01 Apr 1998
Date of revision:
Handle: RePEc:wpa:wuwpge:9804001
Note: Type of Document - PostScript Document; prepared on IBM PC; to print on HP 6MP/PostScript; pages: 20 ; figures: Submitted in EPS Format (FIG1.EPS thru FIG5.EPS). Text was originally prepared in Word for Windows 6.0 and submitted via ftp in PS format. Figures were originally created in TeX and submitted via ftp in EPS format.
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  1. Steven J. Davis, 1992. "Cross-Country Patterns of Change in Relative Wages," NBER Working Papers 4085, National Bureau of Economic Research, Inc.
  2. Hannu Törmä & Thomas Rutherford & Risto Vaittinen, 1995. "What Will EU Membership and the Value-Added Tax Reform Do to Finnish Food Economy? - A Computable General Equilibrium Analysis," Discussion Papers 88, Government Institute for Economic Research Finland (VATT).
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  5. William G. Gale & John Karl Scholz, 1991. "Intergenerational Transfers and the Accumulation of Wealth," UCLA Economics Working Papers 624, UCLA Department of Economics.
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  7. Patterson, Kerry D & Pesaran, Bahram, 1992. "The Intertemporal Elasticity of Substitution in Consumption in the United States and the United Kingdom," The Review of Economics and Statistics, MIT Press, vol. 74(4), pages 573-84, November.
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  9. Kotlikoff, Laurence J & Summers, Lawrence H, 1981. "The Role of Intergenerational Transfers in Aggregate Capital Accumulation," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 706-32, August.
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  11. HUANG, HE & IMROHOROG[caron]LU, SELAHATTIN & SARGENT, THOMAS J., 1997. "Two Computations To Fund Social Security," Macroeconomic Dynamics, Cambridge University Press, vol. 1(01), pages 7-44, January.
  12. Martin Feldstein, 1996. "The Missing Piece in Policy Analysis: Social Security Reform," NBER Working Papers 5413, National Bureau of Economic Research, Inc.
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  14. N. Gregory Mankiw & Julio J. Rotemberg & Lawrence H. Summers, 1982. "Intertemporal Substitution in Macroeconomics," NBER Working Papers 0898, National Bureau of Economic Research, Inc.
  15. Mercenier, Jean & Yeldan, Erinc, 1997. "On Turkey's trade policy: Is a customs union with Europe enough?," European Economic Review, Elsevier, vol. 41(3-5), pages 871-880, April.
  16. Paul van den Noord & Richard Herd, 1993. "Pension Liabilities in the Seven Major Economies," OECD Economics Department Working Papers 142, OECD Publishing.
  17. repec:bil:bilpap:963 is not listed on IDEAS
  18. Hum, Derek & Simpson, Wayne, 1994. " Labour Supply Estimation and Public Policy," Journal of Economic Surveys, Wiley Blackwell, vol. 8(1), pages 57-81, March.
  19. W. R. M. Perraudin & Thierry Pujol, 1990. "European Fiscal Harmonization and the French Economy," IMF Working Papers 90/96, International Monetary Fund.
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