The Price of Maturity

Finance and Development, pp. 7-11, June 2011

6 Pages Posted: 15 Jun 2011

See all articles by Ronald D. Lee

Ronald D. Lee

University of California, Berkeley - Department of Demography; National Bureau of Economic Research (NBER)

Andrew W. Mason

University of Hawaii at Manoa; East-West Center - Research Program

Date Written: June 2011

Abstract

Over the next few decades population aging will begin developing in many countries and become much more challenging in high-income countries. Population aging has profound implications for the economy because of the economic life cycle, characterized by extended periods of, “dependency,” at young and old ages. The first order economic effects of population aging are captured by the support ratio, the effective number of workers divided by the effective number of consumers. Support ratios constructed using National Transfer Account data show that for many developing countries changing age structure is boosting economic growth by as much as one percent per year. In high-income countries, however, economic growth could be depressed by as much as one percent per year in the absence of effective responses by individuals and by governments. To the extent that the elderly are self-sufficient, relying on continued work and the accumulation of assets to support themselves in old-age, population aging may produce a second demographic dividend, a further spur to economic growth. Comprehensive estimates of the support system for the elderly show great variation across countries, however, in the extent to which the elderly are relying on themselves or depending on younger generations to fund their material needs in old-age. Postponing retirement is an important response to population aging, but must be complemented by increased emphasis on the accumulation of assets in the form of housing, pension funds, and personal savings.

Keywords: aging, retirement

Suggested Citation

Lee, Ronald D. and Mason, Andrew W., The Price of Maturity (June 2011). Finance and Development, pp. 7-11, June 2011. Available at SSRN: https://ssrn.com/abstract=1864805

Ronald D. Lee (Contact Author)

University of California, Berkeley - Department of Demography ( email )

2232 Piedmont Avenue
Berkeley, CA 94720-2120
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Andrew W. Mason

University of Hawaii at Manoa ( email )

Honolulu, HI 96822
United States

East-West Center - Research Program ( email )

1601 East-West Road
Honolulu, HI 96848
United States

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