Demographics, Wealth, and Global Imbalances in the Twenty-First Century

99 Pages Posted: 18 Aug 2021 Last revised: 26 Aug 2021

See all articles by Adrien Auclert

Adrien Auclert

Stanford University - Department of Economics

Hannes Malmberg

University of Minnesota

Frederic Martenet

Stanford University

Matthew Rognlie

Northwestern University

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Date Written: August 25, 2021

Abstract

We use a sufficient statistic approach to quantify the general equilibrium effects of population aging on wealth accumulation, expected asset returns, and global imbalances. Combining population forecasts with household survey data from 25 countries, we measure the compositional effect of aging: how a changing age distribution affects wealth-to-GDP, holding the age profiles of assets and labor income fixed. In a baseline overlapping generations model this statistic, in conjunction with cross-sectional information and two standard macro parameters, pins down general equilibrium outcomes. Since the compositional effect is positive, large, and heterogeneous across countries, our model predicts that population aging will increase wealth-to-GDP ratios, lower asset returns, and widen global imbalances through the twenty-first century. These conclusions extend to a richer model in which bequests, individual savings, and the tax-and-transfer system all respond to demographic change.

Suggested Citation

Auclert, Adrien and Malmberg, Hannes and Martenet, Frederic and Rognlie, Matthew, Demographics, Wealth, and Global Imbalances in the Twenty-First Century (August 25, 2021). University of Chicago, Becker Friedman Institute for Economics Working Paper No. 2021-98, Available at SSRN: https://ssrn.com/abstract=3906779 or http://dx.doi.org/10.2139/ssrn.3906779

Adrien Auclert (Contact Author)

Stanford University - Department of Economics ( email )

Landau Economics Building
579 Serra Mall
Stanford, CA 94305-6072
United States

Hannes Malmberg

University of Minnesota

10 University Avenue
Duluth, MN 55810

Frederic Martenet

Stanford University

Stanford, CA 94305
United States

Matthew Rognlie

Northwestern University

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