Demographic Change and Policy Responses: Implications for the Global Economy

30 Pages Posted: 26 Mar 2007

See all articles by Rod Tyers

Rod Tyers

Australian National University (ANU) - School of Economics; The University of Western Australia - Department of Economics

Qun Shi

Australian National University (ANU) - Research School of Pacific and Asian Studies (RSPAS)

Abstract

The fertility declines associated with the final phase of the global demographic transition have led to slower population growth and accelerated ageing in developed countries and in several advanced developing countries. A global demographic and economic model is used to assess the implications of these changes for population sizes, age-gender distributions, labour force growth and their implications for economic performance. A baseline projection that incorporates declining fertility is compared with a hypothetical constant population growth scenario. The results show that slower population growth and ageing reduces average saving rates in industrial regions, yet global investment demand is also slowed and saving rates rise in developing regions, so there is no net tightening of financial markets. Increased aged labour force participation, considered one solution to the resulting rise in aged dependency in advanced regions, is found to redistribute investment in favour of the industrialised regions and hence to accelerate their per capita income growth, while conferring on the other regions compensatory terms of trade improvements. The alternative of replacement migration is found to require inconceivably large population movements. It also impairs real per capita growth in destination regions but by least in Western Europe, where the terms of trade are improved by the immigration.

Suggested Citation

Tyers, Rod and Shi, Qun, Demographic Change and Policy Responses: Implications for the Global Economy. The World Economy, Vol. 30, No. 4, pp. 537-566, April 2007, Available at SSRN: https://ssrn.com/abstract=976096 or http://dx.doi.org/10.1111/j.1467-9701.2007.01004.x

Rod Tyers (Contact Author)

Australian National University (ANU) - School of Economics ( email )

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The University of Western Australia - Department of Economics ( email )

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HOME PAGE: http://www.business.uwa.edu.au/school/staff-profiles?type=profile&dn=cn%3DRodney%20Tyers%2Cou%3DEcon

Qun Shi

Australian National University (ANU) - Research School of Pacific and Asian Studies (RSPAS) ( email )

Division of Economics, RSPAS
Canberra, Australian Capital Territory 0200
Australia

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