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Index
Accumulated savings, 110Actuarial reduction, 324Acute care
defined, 129Additional Pension for Permanence
(PAP) plan, 279Administradores de Fondos de Ahorro
para el Retiro (AFORES), 124AFJP, 279
pension fund investments, 279AFP, 276Africa
working conditions, 7Aged dependency
financed, 228future, 330measure, 225ratio, 69total entrepreneurial activity
index, xiiiAge pension
Australian system, 267Ages of life, 1Age structure
forces affect, 12Mexico, 27national population, 25–31
Aging population, 1–5, 2, 8, 72burden onto retirees, 300and capital investment, 215capital returns, 220consumption
financed, 72
economic cost, xiieconomic dependency, 68–78economic growth, 156financing, 240global investment vs. global savings, 221growing dependency
prospects, 33–34health care goods and services, 129health consumption patterns, 130–135implications, 106, 370labor forces, 156and labor shortfalls, 257lived with children, 104long term care, 149Mexican population, 78pay go financing scheme, 303perception, 345population
relative size, xvproviding income security
contemporary approaches, 81–92responses
views held by EC and OECD, 339and retirement benefit levels, 192
Allocated pensionretirement vehicle, 87
Allocating future resourcesalternative options, 342
Alternative benefit paths65 year old male retiree, xiii
Alternative funding arrangementsand benefit approaches
payment of retirement benefits, xi
373
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374 Index
Alternative public policyrisks related to, 316–350
Alternative retirement systemconsumption and savings rates, 108retirement living standards, 122, 123retirement patterns, 121
Annuitizationjoint and survivor, 359
Annuityvs. lump sum payment, 332retirement vehicle, 87
Argentinabusiness procedural costs, 309evolving population structure, 29immigration rates, 20modified pension system, 278populations age ratio, 40
Asiabusiness procedural costs, 309working conditions, 7
Asia crisis1997–98, 305
Asian countries. See also specific countryfertility rates, 78
Asociacion de Fondos de Pension(AFP), 276
Asset accumulationpattern, 109
Australiaage pension system, 267baby boomers, 218birth rates
after World War II, 29capital labor ratio, 218demographic pattern
next 30 years, 77dependence on employer based
pensions, 331early retirement benefits, 244fertility rates, 29immigration rates, 20, 21importer of people, 20individual account plans, 86IT investment, 163labor force participation, 199
older females, 242labor productivity during 1990s, 162mandated savings program, 267mandatory retirement savings
program, 82occupational programs, 248
pension reforms, 267, 341populations projections, 22privately managed defined contribution
funds, 269protection from prolonged adverse labor
market, 318public pension program funding, 239retiree population, 101retirement age increasing
men and women, 245retirement income provisions, 267unemployment pensions, 261and World Bank, 268
Austriaaverage retirement ages, 291consumption growth, 299early retirement, 259
benefits, 244GDP per capita, 176health care technology, 365immigration, 213labor force
older male workers, 241participation rates, 291young adults, 204
payroll tax rates, 238retirement benefit
indexed to earnings, 297levels, 190
social insurance, 237worker delaying retirement, 247
Baby boomers, 3–4, 5, 17, 55, 218Australia, 218Canada, 29, 218Japan, 280retirement, 82, 112United States, 79, 218
Backloading, 249Basic income security
national retirement systems, 320Basic Pension
U.K. system, 89Belgium
dedicated public schemes for earlyretirement, 258–263
female labor force participation, 202foreign direct investment, 287labor productivity, 371life expectancy, 98male retirement, 97
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Cambridge University Press052185153X - The Economic Implications of Aging Societies: The Costs of Living HappilyEver AfterSteven A. Nyce and Sylvester J. SchieberIndexMore information
Index 375
men and women retirement ageincreasing, 245
population aging, 99and retirement benefit levels, 192unemployment pensions, 261
Belgium’s Silver Fund, 113Benefit reductions
forms, 320Berlusconi, Silvio, 180Beveridge, William, 44Beveridge Report
1942, 44Birth cohorts
workforce, 60Birthrates, 10, 11, 19, 22
after World War II, 29during Great Depression, 29during World War II, 29effects, 62and funded pension systems, 57Germany, 19projected, 75world population, xiii
Bludell, Richard, 255Bonds
rate of return, xiv, 64, 68Bosworth, Barry, 116Brazil
business procedural costs, 309evolving population structure, 29immigration rates, 20new business procedures, 309population estimates, 24
Britaincontributory plans, 50
Buchanan, James M., 346Burtless, Gary, 116Bush, George H., 179Bush, George W., 113Bush’s tax policy, 311
Canadaaccelerated payroll tax, 341age structure, 29baby boomers, 29, 218basic benefit, 83birth rates after World War II, 29capital income shares, 223capital labor ratio, 218consumption profiles, 166demographic pattern, 77
employer sponsored pension, 254evolving age distribution, 31evolving population distributions, 25expansion of, 237fertility rates, 29funding approach, 355GDP growth expectations, 199health care technology, 365high immigration rates, 21image, 29immigration rates, 20importer of people, 20labor force participation, 199, 242, 283labor productivity during 1990s, 162new contributory plans
after World War II, 50occupational programs, 248population
age, xi, 31projections, 22structure, 29
preretirement earnings, 318productivity improvement pattern, 181protection from prolonged adverse labor
market, 318public pension funds management, 276real returns on pension assets, 274retiree dependency projections, 64retirement age, 254retirement programs, 37savings rates, 216voting pattern, 348voting rates, 348and World Bank, 268
Canadian Pension Plan (CPP), 83contribution rates, 84
Capitalcomparative rates of return, xviivs. efficiency, 214, 219expanded, 155flowing across national borders, 314and organizational behavior, 233and production of goods and
services, 219and productivity, 225rate of return, 219
components, 222shifting
underdeveloped economies, 284supply, 215utilizing, 228–233
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376 Index
Capital based model, 36Capital deepening, 241
aging societies, 314alternative to additional labor, 214Japan, 224
Capital flowsclassified, 284
Capital for workerssubstituting, 240
Capital incomeshare of GDP, xviivs. social transfers
reliance, 105Capital investment
promote, 210Capitalism, 225Capital labor ratios, 283Capital management
effective, 231Capital owners
investing abroad, 305Capital per worker
average annual growth rates, xviiCapital reversals
supervisory and regulatoryframework, 306
Capital stockaverage growth rates, xvcapital returns, 219estimating, 219to output, xvii
Career failurecosts of insuring, 329
Caring for, 143Carter, Jimmy, 179Central America. See also specific country
development potential, 283Centralized pension asset management
of mandated retirement savings, 276Chile
demographics, 266dependence on employer based
pensions, 331disability insurance, 265evolving population structure, 29independent investment entities, 276individual account system, 86
regulatory restrictions, 278pay go retirement plans, 264pension reforms, 267rate of return and minimum
pension, 266
significant emigration, 20term life insurance, 265
Chinabusiness procedural costs, 309capital flows, 368declining dependency, 77dependency patterns, 77economic dependency on workers, 74economic position, 77evolving demographic dependency, 76foreign direct investment (FDI)
attracting, 310by International Money Fund, 310
job growth, 311juvenile and elderly dependency relative
to active workers, xiiolder population, 43opening economy, 311population, 22
retiree, 101structure, 31working age, 283
projected increases in retireedependency, 62
working conditions, 7Chirac, Jacques, 180Clinton, Bill, 179
federal budget surpluses, 360Clustering behavior model, 326Cogan, John, 272Collectivizing redistribution of income, 346Commercial Code, 308Committee on Social Protection
EC, 340Company Law
minimum deposit, 308Compensation packages
adjustments, 229Compound interest, 54Consumer goods
classification, 344Consumer loan, 110Consumption
behavioracross age spectrum, 73
changes, xviequivalence measures, 73expenditures, 187
age profile, xiigrowth, xvi
between elderly and nonelderlypopulation, xviii
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Cambridge University Press052185153X - The Economic Implications of Aging Societies: The Costs of Living HappilyEver AfterSteven A. Nyce and Sylvester J. SchieberIndexMore information
Index 377
per capita, 299for workers, 299
percentage increases, xviand retirement benefit levels, 187and savings patterns
life cycle model, 166share of output, xviyouth rates, 74
Consumption loan, 217and accumulate sufficient assets, 319model, 52, 55, 347
Contemporary retirees2005, 79
Contracting workforces, 184.See also Labor force
Contract out, 83Contributions
limited, 239rates of return, 239
Contributory pensions, 235Contributory retirement systems
workers vs. nonworking dependents, 59Coordinated salary, 89Countries. See also specific country
dependency ratios, 74dependency ratios increases, 62developed
life expectancy, 14losing population, 22
CPP, 83contribution rates, 84
Creative destruction, 225Cross border migration
Europe, 283Cross generational transfers, 329Cross national capital flows
facilitating, 368–369preconditions, 369
Cross national investing, 368Crude aged and total dependency
ratios, xivCuba
fertility rates, 78Customer capital, 230
Deathspremature, 352U.S. men
distribution, xiiiDeclining dependency
Poland, 75Deficit financing, 339
Defined contribution rate, 87Demographic aging
capital returns, 220financing, 240and labor shortfalls, 257and retirement benefit levels, 192
Demographicsand output demand, 165–171
Demographic transitioneconomic expansion, 168GDP and tax revenues, 234
Denmarkearly retirement, 258–263
programs, 262foreigners, 213health price inflation, 135labor force participation, 199
young adults, 204percentage elderly who live with
children, 104retirement age, 243retirement benefits
indexed to earnings, 297Dependency patterns
countries, 77Dependency ratios
countries, 74early retirement patterns, 60increases, 62
Developed countrieslife expectancy, 14
Developing economiesinvesting, 305potential, 7
Diamond, Peter, 113, 117Direct investment, 284
flow, 287Disability, 352
benefits, 43national social insurance system, 317
Chile, 265Finland, 261income replacement rates, 259, xviiiinsurance, 94pensions
Netherlands, 261, 262Sweden, 261, 262
programsincome replacement rates, 259increasing rates, 260work criterion, 259
social insurance, 352
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378 Index
Disability (cont.)and unemployment benefitsUnited Kingdom, 261
Disposable income, 10965 and over, xiv
Docteur, Elizabeth, 364Draw down (allocated pension)
retirement vehicle, 87
Early labor force withdrawalseliminate incentives, 257
Early retirement, 93incentives, 121
influence within private pensionplans, 255
introduction, 251supporting, 256
issuesand increasing labor supply, 290
patternsdependency ratios, 60
pensions, 94elimination, xiiigoal, 92implicit tax rates, xvii
Early survivors programssocial insurance, 352
Earningsgross replacement, xviipatterns, 235preretirement, 318
gross replacement, xviiireplacement, xi
profiles, 235and retirement benefits, 297synthetic profiles, 235
Eastern Europetotal dependency, 76working age population declining,
282EC. See European Commission (EC)Economic(s)
contributions into social insuranceprograms, 240
inactive population, 99increases, 303model, 195, 214protection, 353reduce growing fiscal pressures, 303total output, 160
Economic dependencyaging societies, 80
Economic efficiencystructured to encourage
pension system, 357Economic growth
distribution effectselderly and nonelderly, 299
improvement, 2Economic implications
age dependency versus youthdependency, 68
Economic infrastructureimprovement, 306
Economic output growthfoundation for growth, 181–185
Economic productionmathematical terms, 157
Economic prosperityconcepts, 154
Economic risksimposed by aging population, 342insuring against
during retirement period,330–338
working period, 317–330political
aging societies, 338–350Economic slowdown, 179
and retirement benefit levels, 190retirement burden levels, 185
Ecuadorpension fund investments, 273
Education systems, 5Egypt
fertility rate, 27low labor force participation rates of
women, 94pension fund investments, 274
Elderly. See Aging populationEmigration
Chile, 20growth, 20–22
Empirically based equivalence scale, 72Employee Pension Fund, 90Employee satisfaction
customer loyalty, 232Employees’ Pension Insurance
(EPI) programJapan, 90
Employees Provident FundMalaysia, 273pension fund investments, 273, 274
Employee turnover, 249
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Cambridge University Press052185153X - The Economic Implications of Aging Societies: The Costs of Living HappilyEver AfterSteven A. Nyce and Sylvester J. SchieberIndexMore information
Index 379
Employer based pension system, 82design implications, 250labor force participation, 250principles for reforming, 363third tier, 88–92United States, 91
Employment levelsUnited States, 156
Englandminimal need, 344
Entrepreneurial activity, 225and aged dependency, 225
EPF. See Employee Pension Fund;Employees Provident Fund
EPI programJapan, 90
Equitable treatmentpension reform principle, 356
EU. See European Union (EU)Europe
growth in capital stock, 158labor markets, 209rates of return on capital, 220retirement systems
pay go elements, 50European Commission (EC)
aging populationresponses, 339
Committee on Social Protection, 340estimated distribution of global output,
313objectives that encompass economic
goals, 315population shifts, 313projections of growth of GDP per capita,
176quality and sustainability, 340
European Union (EU). See also specificcountry
costs from aging dependency, 339elderly
distribution of wealth, xixFDI in, 310working age population declining, 282
Evolving national population, 22Export capital, 281
FDI. See Foreign direct investment (FDI)Federal civilian employees, 48Federal Reserve Board
estimated rates of growth in GDP, 158Feldstein, Martin, 111
Femaleslabor force participation, xvii, xviii, 4, 5,
60, 62, 201, 202, 241, 242vs. fertility rates, 5, 202increase needed, xviincreasing, 201Ireland, 291vs. males, 58
Pakistan population, 25social security benefits, 59workforce, 58
Fertility rates, 12, 56Canada, 29changes, xiiichanging, 17–19Cuba, 78declining, 78distribution, 18vs. female labor force participation rates,
5, 202and immigration, 213importance of, 25Mexico, 27Poland, 76projected, 19various, 27white women in U.S., xi
FFEChina, 310
Financial inflowsresult in, 306
Financing pensionsapproaches, 37–43
Finlanddisability, 261early retirement benefits, 244early retirement programs, 262GDP per capita, 176health care technology applications,
366IT investment, 163pipeline unemployment benefit, 262retiree income rates, 103strategy for managing rising pension
costs, 297unemployment rates, 209, 218workforce participation rates, 291
First tier benefit, 83Flat rate contributory pension, 44Floor benefit plan, 81Foreign capital owners
investment, 308
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380 Index
Foreign direct investment (FDI), 285in China
by International Money Fund, 310inflows and outflows, xviiipattern, 287upsurge, 287
Foreignersresentment, 213
Foreign funded enterprises (FFE)China, 310
Foreign investmentimpediments, 308
Foreign investorsexpectations and confidence, 287
401(k) retirement plans, 92, 127France
capital income shares, 223capital labor ratio, 217consumption growth, 299early retirement benefits, 244economic slowdown, 180fertility rates, 29filial responsibility laws, 149health care technology, 365health price inflation, 135labor force participation, 199
older female, 242older male workers, 241young adults, 204
labor movement, 370labor productivity, 371
growth, 196during 1990s, 162
life expectancy, 98minimal need, 344occupational programs, 248pattern of productivity
improvement, 181pension schemes, 245percentage elderly who live with
children, 104populations aging, 249rates of return on capital, 220strategy for managing rising pension
costs, 297unemployment rates, 209voting ages, 349workforce participation rates, 291
Free market ideology, 181Funded pension systems, 39, 45, 46, 47,
123–125, 217, 235
administrative costs low, 358affected by
birth rate, 57assets, xichanging wage rates, 66cost, 56demographic challenges, 125effectiveness, 269increasing longevity, 122interest, 67interest rate, 64vs. living longer, 121long term costs, 46vs. pay go pension system, 55, 117saving, 112shift toward, 279sufficient assets accumulated, 319worker participating
accumulated savings, xiiFund management, xviiiFund organization
classifications, 269
Gaullists’ Rally, 180GDP. See Gross domestic product (GDP)General Theory of Employment, Interest,
and Money, 165Germany
aging problems, 185automatic demographic triggers, 342birth rate projection, 75birth rates, 19capital efficiency, 223capital income shares, 223capital labor ratio, 217consumption growth, 299consumption profiles, 166early retirement benefits, 244economic slowdown, 180elasticity of substitution between capital
and labor, 221female labor force participation, 202fertility rates, 21GDP per capita, 176health services utilization, 138immigration, 210, 213importer of people, 20income earned by elderly, 104labor force participation, 199
elderly populations, 33encourage to work longer, 326
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Cambridge University Press052185153X - The Economic Implications of Aging Societies: The Costs of Living HappilyEver AfterSteven A. Nyce and Sylvester J. SchieberIndexMore information
Index 381
expansion, 207rates, 291rates for older men and women, 202sustained contractions, 160–163working age population declining, 282youth populations, 33
labor or output shortfall, 198payroll tax rates, 238pension reform, 127pension system, 221percentage elderly who live with
children, 104population
aging, 249projections, 22structure, 31
productivity, 371growth, 196improvement pattern, 181during 1990s, 162
public pension benefits, 105, 109rates of return on capital, 220retiree dependency projection, 62retirement age
changes, 325eligibility, 92increasing, 245
retirement benefitsindexed to earnings, 297levels, 190, 192
retirement programsnational, 43
savings rates, 168, 216social insurance, 43, 85, 237state pension systems, 84, 88transparent benefits, 361unemployment rates, 207
Global capital flowssupervisory and regulatory framework,
306Global economy
evolution, 371Global output distribution
estimated, xiiiGonzalez, Felipe, 180Governmental retirement programs
voting habits, 347Government bonds, 124Government mandated contributory
programs, 82Government sponsored retirement systems
Germany, 37Italy, 37
Great Britainpension benefits, 66pension system, 83
Great Depressionbirth rate during, 29
Greecefilial responsibility laws, 149
Gross domestic product (GDP), 154, 176and capital income, xviicompound annual growth, xv, xvigrowth, xvi
estimated rates by Federal ReserveBoard, 158
Ireland expectations, 199vs. Medicare costs, 143rates, xiv, xvretirement burden levels, 185and standards of living, 305
Japan, 224labor’s share, xvlevels
vs. health expenditures, 136per capita declines
New Zealand, 293for elderly and youth populations, xiv
percent of health care expenditures, xvand tax revenues
demographic transition, 234health care, 234pay go pension systems, 234
Gross replacement rateschanges, xviii
Growth ratesin real gross domestic product, xiv
Halfway technology, 144Health and Retirement Study (HRS)
U.S. National Institute on Aging, 327Health care
consumptionintensity spiral, 143–145patterns, 130–135retrospective payment structure, 145
costs, 364driving up, 135–139vs. dying, 135financing technologies, 364health care program, 241rate of growth, xv
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382 Index
Health care (cont.)defined, 129dilemma, 151expenditures
driven by advancing age, 132elderly, xvfinanced, 130vs. GDP levels, 136growth, xvpercent of GDP, xv
GDP and tax revenues, 234goods and services
and aging population, 129inflation, 135, 138and pensions
total public expenditure, xvrelated technology
cost growth, 364research and development
U.S. government spending, 146services
limiting, 148, 149technology
evolution, 145–149utilization, 367
Home careshare of population, xv
Home production, 102Hosokawa, Morihiro, 179Household income distributions, 104HRS
U.S. National Institute on Aging, 327Human Capital Index
for Europe, 232Human resource management practices
firm performance, 231research taxonomy, 231
Human resourcesorganizational effectiveness, 233
Hump shaped consumptionprofile, 167
Hungarypopulation, 22, 31, 56
Icelandlife expectancy, 98male retirement, 97pension and nonemployment benefit
environment, 263population aging, 99retirement age, 243workforce participation rates, 291
Idealist theory philosophyof political order, 346
Immigration, 12, 20, 21, 27, 56, 213effects on government budgets, 240and fertility rates, 213growth, xvii, 20–22labor force participation, 210rates, xiiiresentment, 213
Implicit tax ratesestimated, 247
Importing labor, 20, 284Improving productivity
improved living standards, 163Income distributions, 104Income security
pillars, 264India
assets, 271business procedural costs, 309job growth, 311opening economy, 311population, 22
evolving structure, 29working age contraction, 283
potential labor resources, 6working conditions, 7
Indonesiabusiness procedural costs, 309fertility rate, 27new business procedures, 309tensions resolved, 307
Information technology (IT)and regulatory practices, 163sector, 162
Insurance coveragelong term care, 149
Intellectual capital, 230Interest rates, 64–68Intergenerational concern, 350Intergenerational transfers, 36
programs, 111International capital flow
induce, 285restrictions on, 221
International Savings ComparisonProject, 166
Intertemporal retirement transfers, 330Intertemporal transfer mechanisms, 37Investment led growth, 311Investments
Japan, 313
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Index 383
Iranfertility rate, 27
Irelandcapital efficiency, 224evolving population structure, 29female labor force participation
rates, 291GDP growth expectations, 199GDP per capita, 176importer of people, 20labor force
older male workers, 241population, 22preretirement earnings, 318productivity growth during 1980s, 162public pension funds
management, 276significant emigration, 20social insurance, 237
Islamic populationstensions resolved, 307
ITand regulatory practices, 163sector, 162
Italyage distribution, 31aging problems, 185automatic demographic triggers, 342average retirement ages, 291Berlusconi government
labor strife, 370birth rates, 19
projection, 75capital income shares, 223consumption growth, 299consumption profiles, 166dependence on employer based
pensions, 331early retirement programs, 262economic dependency on workers, 74economic slowdown, 180fertility rates, 21, 31, 75filial responsibility laws, 149GDP per capita, 176health care technology applications, 366immigration, 213importer of people, 20juvenile and elderly dependency relative
to active workers, xiilabor force participation, 95, 199
female, 94, 202, 242, 291older men and women, 202, 241
shortfalls, 199sustained contractions, 160–163young adults, 204
life expectancy, 31notional basis, 88payroll tax rates, 238pension schemes, 245percentage elderly who live with
children, 104population
age structure, xideclining, 56estimates, 24evolving distributions, 25projections, 22working age, 282youth, 33youth and elderly, 33
preretirement earnings, 318growth, 196improvement pattern, 181
rapidly aging countries, 66rates of return on capital, 220retiree dependency projection, 63retirement benefit levels, 190savings rates, 216significant emigration, 20total dependency, 76unemployment rates, 209
Jackson, S.E., 231James, Estelle, 323Japan
aging problems, 185baby boom, 280birth rates, 19, 75capital deepening, 224capital efficiency, 223capital labor ratio, 217capital stock growth, 158capital stock to GDP ratio, 224consumption expenditures, 171consumption profiles, 166decline efficiency, 280economy, 178Employees’ Pension Insurance (EPI)
program, 90FDI in, 310fertility rates, 19GDP, 224GDP per capita, 176government debt, 224
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384 Index
Japan (cont.)growing dependence on capital, xviihealth care technology, 365health services utilization, 138immigration, 213income earned by elderly, 104investment strategy, 280labor force participation
rates, 291sustained contractions, 160–163working age, 283
men 65 to 74 living with spousework income, 104
nonemployment benefits, 263Osaka Bay airport, 312pension programs, 263, 370pension reforms, 127, 341population
aging implications, 168declining, 56elderly, 33projections, 22size and age distribution
effects, 178structure, 31youth, 33
pressure on policymakers, 179productivity
improvement pattern, 181during 1990s, 162
public pension funds management, 276public policy issues, 312rapidly aging countries, 66real returns on pension assets, 274retirement benefit levels, 190, 192retirement systems
pay go elements, 50return on capital, 220, 224savings rates, 216severance benefit, 90two tiers public system, 90
Job securityexcessive, 232
Johnson, Lyndonwar on poverty, 344
Keynes, John Maynard, 165Kohl, Helmut, 180Korea
female labor force participationrates, 291
health care, 135, 365pension reforms, 341
Kuwaitfertility rate, 27
Labor and capitalsubstitutability between, 215
Labor force participation, 74, 1542001, 58activity rates
levels of affluence, 300age groups
various countries, 291anticipation trends
men 60 to 64, xiiassumption
older people, 99behavior
aging societies, 314boost, 195changing, 58, 196compound annual growth, xvicontracting workforces, 184declining
ages of 50 to 54 and 55 to 59, 94older people, 5960 to 64, 95
demand2010, xviiestimate, 197projections, 197
females, xvii, xviii, 4, 5, 60, 62, 201,241
vs. fertility rates, 5, 202increase needed, xvivs. males, 58
growth rates, xivcountries, 61projected, 62
higher rates of, 303high rate countries, 207immigration, 210importing, 20, 284incentives
created by nonemployment benefits,258–263
and income replacement rates, 303increasing, xvi, 199
female, 201older people, 202young adults, 203
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Index 385
males, xviii, 184, 241, 253vs. females, 5855 to 64, xviiUnited States, xiii
mobility, 249national populations, xivolder workers withdrawing
reasons, 243productivity
growth, xviprojection, 181
for women, 182pursing higher, 290retirement age population, xivretirement benefit levels, 187, 192, 194shortfalls, 195
solving, 196shrinking, 229sources, 196stability, 249supply projections, 197utilization rates
consumption expenditures, 300withdrawals
factors affecting, 241–247working age population
productivity, 293projections, xviii
young adults, 204Labor hours
average growth rates, xvLabor market, 371
effects of occupational programs,247–258
optionsviewing, 196–206
rigiditiesreduce, 210
utilizationimprovements, 294
Latin Americabusiness procedural costs, 309dependence on employer based
pensions, 331fertility rates, 78new business procedures, 309
LDP, 179Leimer, Dean, 111Leisure
vs. material goods, 326Lesnoy, Selig, 111
Liberal Democratic Party (LDP), 179Life
estimated values, 152Life cycle model, 38–39, 52, 166, 216Life examination, 14
developed countries, 14Life expectancy, 1, 3, 12, 44, 25, 57
improvements, xiii, 16retirement burdens, 97
Lifetime switch option, 124Lives of a Cell, 143Living standards. See Standard of livingLondon Business School, 225Longer lives
and health care consumption,139–143
Long term careby age group, xiicosts
projections, xvdefined, 129demographic trends
various countries, 78insurance coverage, 149provision, 149
Looking around model, 361Lower interest rates
attract, 289Lump sum retirement benefit, 87
vs. annuity, 332, 333live on only, 334
Luxembourgdedicated public schemes for early
retirement, 258–263foreign direct investment, 287
Malaysiaassets, 271EPF, 273immigration rates, 20population
elderly growth, 40evolving structure, 29
Mandated pension savingsfunding, 270
Mandated retirement age, 330Mandated retirement benefits
purpose, 329Mandatory national pension systems
assets, 271Marginal propensity to save, 111
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386 Index
McClellan, Mark, 147McGill, Dan, 258Medicare
acute care expendituresforecasts, xv
costsrelative to GDP growth, 143
coverage, 130expenditures
from 1988 through 1995, 130United States from 1976 to 1988, 130
high cost cases, 133Meghir, Costas, 255Mexico
declining dependency, 77fertility rate, 27immigration rate, 27juvenile and elderly dependency
relative to active workers, xiilabor force participation
rates of women, 94pension fund investments, 274pension reform measure, 124–125population
aging, 31, 78elderly growth, 40evolving distributions, 25structure, xi, 27, 29working age growing, 283
retiree dependency projection, 64significant emigration, 20tequila crisis
1997–98, 305MFP (multifactor productivity), 161Middle East
working conditions, 7Mikula, Boguslaw D., 54Milevsky, Moseh A., xxiv, 274Mitchell, Olivia, 332Miyazawa, Kiichi, 180Mortality, 14Moving production offshore, 279–289Multifactor productivity, 161Multiple regression analysis, 227
NAFTA, 283Nataraj, Sita, 115National analyses
capital, labor and innovation, 229National capital flows
facilitating, 368–369preconditions, 369
National Insurance Act of 1946, 44Britain, 44, 49
National Insurance Contributions(NIC), 83
National investing, 368National Pension Programs
investing in government bonds, 273Japan, 90vs. national savings, 113–117principle for reforming, 352–362
National provident funds (NPF), 87National retirement choices
factors, 43–50National retirement systems
payment of retirement benefits, xireducing financial risks aging
populations impose, 335National Social Insurance Board of
Sweden, 54National social insurance system
disability benefits, 317assess impact of aging population,
220Netherlands
capital labor ratio, 217consumption growth, 299criterion for disability pensions, 261disability pensions, 262employer plans, 91employer sponsored pension, 88expansion of, 237GDP per capita, 176labor force participation, 95
female, 202new contributory plans
after World War II, 50pension schemes, 245population structure, 31retirement benefits
indexed to earnings, 297levels, 192
significant emigration, 20Net immigration, 12Net private capital flows, xviiiNew Zealand
birth ratesafter World War II, 29
demographic patternnext 30 years, 77
fertility rates, 29GDP per capita declines, 293mortality rate, 366
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Index 387
pension reforms, 341preretirement earnings, 318public pension program
funding, 239management, 276
unemployment pensions, 261NIC, 83Nonelderly adults, 72Nonemployment benefits
early retirement programs, 262generosity, 259
Nontechnology, 143Nordic countries. See also specific country
female labor force participation rates,291
retirement age, 243North America
accelerated payroll tax, 341dominant economies, 281
North America Free Trade Area(NAFTA), 283
Norwayearly retirement
benefits, 262dedicated public schemes,
258–263expansion of, 237foreigners, 213GDP growth expectations, 199labor force participation, 199new contributory plans
after World War II, 50payroll tax rates, 238retirement age, 243
NPF, 87
Occupational pension plansefficiency, 249requirements, 249
Occupational pension programs,247–258
OECD. See Organization for EconomicCooperation and Development(OECD)
Offshoring, 279–289, 311Old age labor force
activity rates, 243participation
effects, 244increase needed, xvi
Old Age Pension Act of 1908Britain, 43
Old age unemploymentunemployment pensions, 261
Old to young personschanging ratios, xiii
Open method of coordinationpensions, 340
Organizational effectiveness, 229Organization for Economic Cooperation
and Development (OECD)dependency ratio
multiple regression, xviiGDP per capita
growth projections, 176health care technology, 366new business procedures, 309pension assets
invested, 309population aging
economic implications, 69effects on health care costs, 133fiscal pressures, 341
preretirement earningsestimated gross replacement, 318
retirement agesmen and women, xiv
retirement periodprojection, xiv
Organization’s intellectual capital, 230Organized retirement program
funding, 38Orszag, Peter, 113, 117Output demand and labor demand
linkages, 181Output levels
estimating future, 197Outsourcing, 311
Pakistanage structure, 29declining dependency, 77fertility rate, 25importer of people, 20juvenile and elderly dependency
relative to active workers, xiipopulation
age, 31evolving distributions, 25females, 25males, 25structure, xi
ratio of elderly to youth, 33PAP plan, 279
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388 Index
Pay as you go pension system, 37, 39,40, 44, 46, 52, 122, 236, 269,319
accumulating retirement rights, 109affected by, 57changing wage rates, 66contribution rates, 84costs, 39, 56, 57, 59, 62demographic shifts, 123–125dependency ratios
contribution rates, xiivs. funded pension system, 55, 117
economic variables, 64GDP and tax revenues, 234health care program, 241hypothetical population and
operation, xiinterest, 67interest rates, 64vs. living longer, 121long term costs, 46mathematical operations, xinew contributory plans, 50other savings, 111problem, 362retirement systems, 228shift to funded system, 126, 280worker participating
accumulated savings, xiiPayroll tax, 45
collectionsbegin U.S., 47
contributions vs. benefits, 357effects, 240women’s lifetime vs. men, 51
PBGC, 92Penicillin, 16Pension. See also specific type
effectiveness, 269Pension accounting
accrual basis, 357Pension Benefit Guarantee Corporation
(PBGC), 92Pension cost
alternative rates, 271Pension Fund Administrators
(AFJP), 279pension fund investments, 279
Pension fundingvs. real funding, 123–125realities, 123–128
reserves, xviiitransition
spread across generations, 356Pension plan
administrative costs low, 358asset cumulations managed
efficiently, 358Pension programs
contributory programs, 239payroll tax rates, xvii
Pension reformsexplicit and transparent, 360timeliness, 361transparent benefits, 361
Pension saving, 355Pension structures, 106Pension surplus grows, 114Pension systems
demographic and efficiency, 56demographic challenges, 123vs. federal Social security system, 116labor supply patterns and efficiency, 57reforms
assure long term solvency, 360state governments, 116
Pension transitionsequity issues, 126–128
Pension trust funds, 114Pension wealth, xvii
loss from postponing retirement, 247Performance management system, 231Permanent income model, 166Peterson, Todd, 362Pharmaceuticals
economic justification, 147Philippines
tensions resolved, 307Physical capital
vs. productive, 155productivity
innovation, 155Plan structure
retirement and work behavior, 235–241Poland
declining dependency, 75economic dependency on workers, 74fertility rate, 76juvenile and elderly dependency
relative to active workers, xiipopulations projections, 22total dependency, 76
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Index 389
Political orderidealist theory philosophy of, 346
Political risksaddressing aging issues, 345–350
Ponzi game, 54Population. See also specific country
ages ratiosvarious countries, 43
diversity of, 351growth, 10
vs. labor supply, 22result from, 56vs. workforce, 176
growth rate, xivlevels, xiii
changes, 22size effect on consumption, 171structures, 54
underlying forces, 11Population aging, 1–5
alternative perspective, 10analysis, 2aspects, 351balance between capital and
labor, 215burden, 299consumption expenditures, 169corporate returns effects of, xviicountries losing, 22declining rate of, 11dependency ratio measure, 40distribution, xiiieconomic impact, 3effects, 244estimated retiree, xivgender and age structure, xiglobal context, 8growth in consumer demand, 171growth rate, 11health care retirement costs, 146history of, 8–11and increasing labor supply, 290other than pension problem, 351percentage economically active, xivpolitical economy risks, 338rates of return, 226and retirement benefit levels, 188
Populationist camp, 10Portfolio flows
result in, 306slowdowns, 287
Portfolio investment, 284Portugal
GDP per capita declines, 293retirement age increasing
men and women, 245retirement benefits
indexed to earnings, 297social insurance, 237
Postponing retirementimplicit tax rates, xvii
Poverty alleviationnational retirement systems, 320
PPM, 277Prefunding, 112Premature deaths, 352Premium Pension Authority (PPM),
277Preretirement earnings
gross replacement, xviiireplacement, xi
Prescription drugsregulating prices, 147
Price indexed retirement systems, 344Private and public pensions
ages, xviifor men
relative role, xvPrivate capital flows
slowdown, 285Privately sponsored retirement
programs, 37Private pension system
elements, 120Producing national output
building blocks, 156–159Production function
mathematical terms, 157Productivity. See also specific country
advancementsincrease GDP per capita, 293
compound annual growth, xviefficiency, 229growth, 154
estimates, xvlabor, xvipromotion, 303
improving, 172, 195and standard of living, 163
levels, 160–163Project on Savings and Pensions, 166Provident funds, 87
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390 Index
Public and private pensionscomplementary sizing, 105, 109structure
affected industrialized economies, 234Public expenditures
health careage profiles, xiieducation, 72
percentage of GDPfor elderly and youth populations, xiv
Publicly financed pensionsexpenditures, 69
Publicly managed pension fundinvesting in government bonds, 273investment of assets, xviii
Publicly sponsored retirementprograms, 37
Public pension programsearly retirement, 247–258retirement ages, xvii
Puerto Ricofertility rates, 78
Quasi retirement income replacementrates, xiv, 102
Recruiting excellence, 231Replacement rate, 102Research and development
attractive rewards, 367health care
U.S. government spending, 146Retire
decision, 243, 245, 247Retired population.
See also Population agingeconomic cost, 107
Retiree(s), 1average pension wealth, 245behavior changing, 100burden rate, 107growth, 299income
levels, 101–103sources, 103–106
population, 92–101estimated and projected, xivvs. men, 320projected, 100
retirement benefits2045, 80
Retirementaccumulated assets, xiiilosses in pension wealth from delaying,
247postponing
implicit tax rates, xviistandard, 94
Retirement age, 36, 92–101, 92normal
reducing benefits, 325patterns, 99raising, 324standard, 243various, 97
Retirement assetsself annuitization, 359
Retirement benefitspayment
alternative funding arrangements, xiRetirement burden levels
determining, 185–194Retirement costs
current level and anticipated growth, 98Retirement eligibility age
raising, 323Retirement income systems
designing, 102Retirement patterns, 92–101Retirement plans, 15.
See also Funded pension systems;Pay as you go pension system
change, 4characteristics, 37consumption allocation mechanism,
36–37contribution rates, xiicontribution rates required, xiidefinition, 36economic burden, 43encouraged to adopt changes, 345evolution, 35incentives
to workers to continue workingoptions, 49privately sponsored, 37public first tiers, 82–84publicly sponsored, 37public second tiers, 84–88risk, 358tax impact, 3
401(k) retirement plans, 92, 127
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Retirement policyaligning with labor needs, 234
Retirement problemdemographic forecast, 293
Retirement saving, 354annuitization, 338vs. consumption loans, 109portion annuitized at retirement, 359
Retirement security accumulationhazards, 317
Retirement structurespillars, 264World Bank, 264
Rewards and accountability, 231Riester Pensions, 127Risks of denial
problem, 338–345Roosevelt, Franklin D., 47Russia
business procedural costs, 309and Latin American crises, 305
Samuelson, Paul, 52–55, 78, 319, 347Samuelson’s model, 52Savings
and capital investment, 215create additional, 279distribution, xviiincrease, 6motive, 355patterns and consumption
life cycle model, 166setting up, 355
Schroeder, Gerhard, 127, 180Schuler, R.S., 231Schumpeter, Joseph, 225Scotland
minimal need, 344Self annuitizing
risks, 334Settergren, Ole, 54Shakespeare, William, 1
”All the Worlds a Stage,” 372Shoven, John, 115Singapore
business procedural costs, 309Smeeding, Timothy, 336Smetters, Kent, 114Smith, Adam, 344Smith, Sarah, 255Smoking, 14
Social democratic principles, 345Social insurance, 44
adding tier of savings, 354costs increases, 241disability and early survivors programs,
352Social security. See also United States
advancing, xiiiaggregate pension saving, 120coverage to farm and domestic
workers, 47percent of persons over 65 receiving
benefits, xipercent of workers covered, xireducing benefits, xiiivarious benefits
by group, 51Social Security Amendments
1983, 48Social Security reform, 113Social transfers
vs. capital incomereliance, 105
South Africaage structure, 29elderly populations growth, 40life expectancy, 14
South America. See also specific countrydevelopment potential, 283
Southeast Asia. See also specific countrypopulations
tensions resolved, 307working age population contraction, 283
South Pacificdominant economies, 281
Soviet bloctotal dependency, 76
Spainbirth rates, 19, 75capital income shares, 223capital labor ratio, 217consumption growth, 299early retirement benefits, 244economic slowdown, 180GDP per capita, 176
declining, 293labor force participation, 199
expansion, 207female, 19, 94, 182, 202, 242, 291older men, 19, 202shortfalls, 199, 210
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392 Index
Spain (cont.)sustained contractions, 160–163young adults, 204
payroll tax rates, 238pension costs
strategy for managing, 297population
declining, 56elderly, 33projections, 22structure, 31working age declining, 282youth, 33
positive age distribution effects, 171productivity, 371rapidly aging countries, 66retiree dependency projection, 63retirement age increasing
men and women, 245significant emigration, 20unemployment rates, 209, 210
Spousal dependent benefits, 356SSI program, 83Stability and Growth Pact
EU members, 338Stagnating economies
political pressure, 179Stakeholder pension scheme, 90Standard of living, 92, 345
comparingbefore and after retirement, 101
and GDP growth, 305growth, xviii, 297image, 300improvement, 2, 11
higher workforce participation rates,300
macroeconomic policies, 290through higher productivity, 297
and labor shortfall, 195and retirement benefit levels, 186, 190,
194stimulate growth, 293
Standing by, 143Starting business indicators, xviiiState Earnings Related Pension Scheme
U.K. system, 89State level pension systems, 116State pensions
across the board reductions, 328system’s assets
invested in state’s own bonds, 272
State Second PensionU.K. system, 89
Stewart, Thomas, 230Structural capital, 230Sulfa drugs, 16Supplemental Security Income (SSI)
program, 83Supportive therapy, 143Surplus value, 226Survivor protection
annuitization, 359disability and early survivor programs,
352for juvenile dependents of working
adults, 317–330social insurance, 352
Swedenannuity vs. lump sum payment, 332automatic demographic triggers, 342benefit adjustments, 332dependence on employer based
pensions, 331disability, 261, 262early retirement programs, 262expansion of, 237funding approach, 355GDP per capita, 176immigration rates, 20importer of people, 20individual account plans, 86
reform measure, 277individual retirement savings
account, 355labor force participation, 95, 199
older female, 242young adults, 204
longevity riskstransferred, 331
mandatory contributions, 277modifications
encourage people to work longer, 326new contributory plans
after World War II, 50notional basis, 88percentage elderly who live with
children, 104population
projections, 22structure, 31
public pension funds management, 276real returns on pension assets, 274retirement benefit levels, 190, 192
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Index 393
Swedish AP funds, 113Swiss
health costs of members, 132Switzerland
early retirement benefits, 244employer plans, 91expansion of, 237foreigners, 213health care technology applications, 366immigration rates, 20labor force participation rates, 95life expectancy, 98male retirement, 97new contributory plans
after World War II, 50nonemployment benefit, 263occupational programs, 248pension benefit, 246, 263population
projections, 22structure, 31youth and elderly, 33
rapidly aging countries, 66retirement age increasing
men and women, 245retirement structure
three tier, 88Synthetic earnings profiles, 235
Taiwancapital flows, 368
Tax Qualified Pension Plans (TQPP),90–91
TEA Index, 225aged dependency, xiii
Technology, 144substitute for labor supply growth, 225
Thailandbusiness procedural costs, 309
Theoretical life cycle model, 37Thomas, Lewis, 143Thomas’s classification system, 143Thompson, Lawrence, 107, 121Thompson’s model
first ratios, 108second ration, 121third ratio, 122, 123
TMR, 166Tobin, James, 226Tobin’s Q, 226–228Total consumption
changes, xvi
expendituresage profile, xiiand retirement benefit levels, 187
percentage increases, xviTotal dependency
vs. aged dependency, 69China, 76, 77ratio, 69, 72United States, 77
Total Entrepreneurial Activity (TEA)Index, 225
aged dependency, xiiiTQPP, 90–91Training and Mobility of Researchers
(TMR), 166Trust fund
vs. deficit, 114–117Turkey
fertility rate, 27
UDF, 180Unemployment benefits, 94, 259
and disabilityincome replacement rates, xviii, 259
entitlement conditions, 261Unemployment rates, xvii, 207Unhealthy habits, 14Union for French Democracy (UDF), 180United Kingdom
Basic Pension system, 89benefit plans, 267capital efficiency, 223capital income shares, 223consumption profiles, 166contract out system, 90disability, 261early retirement, 255employer based pensions
dependence on, 331employer pensions, 89, 254fertility rates, 29GDP growth expectations, 199GDP per capita, 176health care technology, 365importer of people, 20labor force participation, 199
female, 184older female, 242older male workers, 241young adults, 204
life expectancy, 98male retirement, 97
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394 Index
United Kingdom (cont.)occupational programs, 248pay go pensions, 50pension costs
strategy for managing, 297pension systems, 83, 246percentage elderly who live with
children, 104population
retiree, 101privately managed defined contribution
funds, 269productivity
growth, 196improvement, 181during 1990s, 162
protection fromprolonged adverse labor market, 318
retiree income rates, 103retirement age, 255savings rates, 168, 216significant emigration, 201940s pension policy, 44stagnating incomes, 330unemployment pensions, 261voting pattern, 348voting rates, 348and World Bank, 268
United Nationscapital utilized efficiently, 6demographic profiles
populations various country, 70United Nations Population Division
population composition estimate, 74United States
baby boomers, 79, 218birth rates
after World War II, 29capital efficiency, 223capital income shares, 223capital labor ratio, 218censuses, 8consumption patterns, 73consumption profiles, 166deficits, 272early retirement
benefits, 244incentives, 250
economic position, 77elderly
distribution of wealth, xix
employer based pensionregulatory and operating
environment, 363employer based pensions, 91
dependence on, 331employer sponsored pension, 253employment levels, 156evolving demographic dependency, 76expansion of, 237FDI in, 310fertility rates, 29
white women, xi, 19funds invested directly
in other economies, 314GDP per capita, 176GDP per capita declines, 293government trust funds, 115health care system deficits, 351health care technology, 365health delivery system
assessment, 365hybrid pension structures, 258immigration rates, 20, 21importer of people, 20IT investment, 163juvenile and elderly dependency
relative to active workers, xiilabor force participation, 95, 192
by age and sex, xiifemales, 62, 184, 202incentives to work longer, 326older female, 242size and productivity, 163young adults, 204
labor markets, 209male
death distribution, xiiiMedicare spending
forecasts, xvmortality rates
men vs. women, 333national savings, 113–117nonemployment benefit, 263occupational programs, 248pension assets
real returns, 274pension benefit, 246, 263percentage elderly who live with
children, 104population
elderly, 33
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Index 395
and output measures, xvprojections, 22working age growing, 283youth, 33
private pension systemobligations, 120
productivity, 163growth, 196improvement pattern, 181and output measures, xvduring 1990s, 162
protection fromprolonged adverse labor market, 318
retiree population, 101retirement age changes, 325retirement age increasing
men and women, 245retirement benefit levels, 190, 192retirement patterns, 326retirement systems, 37
pay go elements, 50savings rates, 168, 216shift among employer sponsored
pensions, 335Social Security, xiv, 44
age availability, 252benefits, 324cash flow, xvfederal budget surpluses, 360implementation, 44personal saving, 111reform, 113trust fund, 115trust fund balance, 119underfunding, 341
for baby boomers, 79state pension accumulations, 272trust fund
accumulation, 113–117voting pattern, 348voting rates, 348war on poverty, 344wealth distribution, 328welfare safety net, 83
United States Marshall Plan, 218United States Medicare program
age, longer lives, and utilization, 141Universal pensions, 82Utilization
and health costs, 138limiting, 148
Utilizing human capitalaging societies, 314
Variability of income, 346Virtual accounts
defined contribution plans, 87Visco, Ignazio, 341Visible poverty, 44Von Bismarck, Otto, 43, 92Voters
estimated shareover ages 50 and 60, xix
and younger population, 348Voting ages
France, 349Voting patterns
Canada, 348governmental retirement programs, 347United Kingdom, 348United States, 348
Voting ratesUnited Kingdom, 348United States, 348
Wage growth, 64–68Wage structure, 55Watson Wyatt Human Capital Index, 231Wealth
classes, 327definition, 328distribution, 328
implications, 328Western Europe. See also specific country
dominant economies, 281pension reforms, 341
Wicksell, Knut, 346Widows, Orphans, and Old Age
Contributory Pensions Act, 44Willetts, David, 343Willmore, Larry, 353Worker productivity
determined, 172Workers
alternative to finding, 214effects on government budgets, 240
Workers myopiainsuring against, 329
Workers notional accounts, 87Workers to beneficiaries
ratio, 303Workforce. See Labor force participation
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396 Index
Workplacecollegial and flexible, 231
Work related incomeelderly, 104
World Bank, 306advocated pension reforms, 268aging population, 24Averting Old Age Crisis, 80and borrowing from pension funds, 273capital utilized efficiently, 6pension funding, 268pension systems, 80regulations entrepreneur, 308starting business, 308
World Bank Policy Research Report, 289World population
births, years lived, xiii
World War IIbirth rate during, 29
Wyatt, Watson, 232
Young adultsin school, xvii
Younger workers labor force participationrates
increase needed, xviYouth
consumption, 72defined, 72dependency ratio, 69and elderly dependency, 77
Zero pillar, 328and World Bank, 268
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