Effect of World Fertility Scenarios on International Living Standards

12 Pages Posted: 6 Sep 2004

See all articles by Ross S. Guest

Ross S. Guest

Griffith University - School of Accounting and Finance - Gold Coast Campus

Ian M. McDonald

University of Melbourne - Department of Economics

Abstract

This paper applies a two good, multi-region Ramsey-Solow model of the world economy to determine the impact that alternative world fertility rates would have on international capital markets and living standards. Notable features of the model include: relative consumption demands and relative employment efficiencies that vary by age, traded and non-traded goods, vintage technology, outward-looking reference consumption, a proportion of non-optimising rule-of-thumb consumers and imperfect capital mobility due to asymmetric information. The model suggests that projected demographic change will imply a flow of international capital from the ageing regions to the younger regions; and that the world interest rate will fall. The lower world interest rate will cause a loss in living standards for ageing regions, the lenders, and a gain for the younger regions, who are borrowers.

Suggested Citation

Guest, Ross and McDonald, Ian M., Effect of World Fertility Scenarios on International Living Standards. Economic Record, Vol. 80, No. S1, pp. S1-S12, September 2004. Available at SSRN: https://ssrn.com/abstract=584051

Ross Guest (Contact Author)

Griffith University - School of Accounting and Finance - Gold Coast Campus ( email )

PMB 50 Gold Coast Mail Centre
9726 Queensland
Australia

Ian M. McDonald

University of Melbourne - Department of Economics ( email )

Melbourne, 3010
Australia

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