emergence of aged economies in the 21st century: use of ... · daniela jara [ eclac/cepal ]...
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Emergence of aged economies
in the 21st century:
Use of long run population
projections for economic forecasts
Tim Miller
Carlo Capra
Daniela Jara
[ ECLAC/CEPAL ]
Presented at the International Seminar on Population Estimates and Projections:
Methodologies, Innovations, and Estimate of Target Populations Applied to Public Policy.
9-11 November 2011, Rio de Janeiro
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Why make long-run economic
and fiscal projects?
• Demography is one of the most important drivers of economic and fiscal change… but you won’t see that in short-run projections.
• Short-run focus leads to mistaken policy choices: too little invested in activities with long-run too little invested in activities with long-run payoffs like education and preventative health measures.
• Long-run focus promotes small course-corrections in public policy which are politically more feasible to implement and unlikely to unfairly burden any particular generation.
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Age-Based Long-run Economic
and Fiscal Projections
• Need population by age -> UN World Population Projection, 2010 Revision.
• Need economic activity by age -> National Transfer Accounts project.
• E(t) = Sum ( P(x,t) * B(x,t) ).
• B(x,~2005) -> NTA
• B(x,t) -> Economic Model.
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Part 1
The Demographic Story:The Demographic Story:
Dramatic changes in age structure
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Bo Malmberg’s
4 Stages of the
Demographic Transition
Child abundant societies (Ages 0-19)Child abundant societies (Ages 0-19)�
Young adult abundant (Ages 20-39)�
Middle-age adult abundant (Ages 40-59)�
Elderly abundant (Ages 60+).
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1950: All societies are child abundant.
1980: The emergence of young adult abundant societies.
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2010: The emergence of middle-age adult abundant societies.
2040: The emergence of elderly abundant societies.
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2070: The global spread of elderly abundant societies.
2100: The global dominance of elderly abundant societies.
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Part 2
The Economic Story:The Economic Story:
Economic activity varies by age.�
Shifts in age structure change the economy.
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The National Transfer Account (NTA) Project
measures economic activity by age.
ConsumptionLabor income
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Examples of age-based
economic projections
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Example 1.
THE DEMOGRAPHIC DIVIDEND
All populations pass through a period in which the population is concentrated among
working-age adults. working-age adults.
This period is particularly favorable to economic growth as the potential workforce grows more
rapidly than the population dependent on it. The demographic dividend lasts for a few decades. At its peak, it can contribute in excess of 1% to the
annual growth in GDP per capita.
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1950-1980: Percent change in GDP/capita due to age structure change.
1980-2010: Percent change in GDP/capita due to age structure change.
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2010-2040: Percent change in GDP/capita due to age structure change.
2040-2070: Percent change in GDP/capita due to age structure change.
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2070-2100: Percent change in GDP/capita due to age structure change.
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Example 2.
THE EMERGENCE OF
AGED ECONOMIES
DefinitionDefinition
In an Aged Economy,
consumption by the elderly
exceeds consumption by children.
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The National Transfer Account (NTA) Project
measures economic activity by age.
ConsumptionLabor income
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1980: No Aged Economies in the World
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2010: 23 Aged Economies
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2040: 89 Aged Economies
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2070: 155 Aged Economies
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2100: 193 Aged Economies in the World
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Example 3.
EDUCATION EXPENDITURES
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Education Expenditures
as share of GDP =
School-age
Population
----------------
(
Expenditure
/School-age X----------------
Working-age
Population
/School-age
Person )
-----------------
( GDP
/Working-
age Person )
X
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Education Expenditures
as share of GDP =
DEMOGRAPHY POLICYX
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Declines in school-age population ->
Doubling or tripling investments per child.
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Example 4.
HEALTH EXPENDITURES
We are still working on this… but 2 interesting facts ...
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Relative health spending per
older person much higher in high
income countries.
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Both probabilistic and scenario-based
population projections will be useful
for long-run economic
and fiscal forecasts.
• Probabilistic projections:• Probabilistic projections:– Measuring uncertainty about future based on
variability observed in the past.
– Overcoming bias.
• Scenario-based projections:– Huge increases in schooling in developing countries.
– Chronic disease epidemic.
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