Demographics and the Evolution of Trade Imbalances
59 Pages Posted: 18 Oct 2019
Date Written: October 8, 2019
The age distribution evolves asymmetrically across countries, influencing relative saving rates and labor supply. Using a dynamic, multicountry trade model I quantify how demographic changes affected trade imbalances across 28 countries since 1970. Counterfactually holding demographics constant reduces net exports in emerging economies that experienced rising working age shares, and boosts them in advanced economies that experienced flatter, or declining, working age shares. This helps alleviate the allocation puzzle. On average, a one percentage point increase in a country's working age share, relative to the world, increased its ratio of net exports to GDP by one-third of a percentage point.
Keywords: Demographics, Trade imbalances, Dynamics, Labor supply
JEL Classification: F11, F21, J11
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