Demographic Uncertainty in Europe. Implications on Macro Economic Trends and Pension Reforms

Michel Aglietta and Vladimir Borgy

Working Papers from CEPII research center

Abstract: Ageing is a main concern in Western Europe for the present half century. It impinges heavily upon the financing of retirement because a shrinking labour force will entail decelerating growth. Moreover, contrary to popular opinion and to most prospective studies which rely on deterministic demographic projections, the determinants of population size and structure are stochastic. The present paper makes use of the INGENUE2 model to assess the economic impact of demographic uncertainty in Western Europe. Demographic uncertainty affects saving, financial conditions and growth significantly from year 2025 onwards. Worst case scenarios can have crippling effects on the financing of public pension under present retirement policies. It makes all the more necessary to study alternatives. We simulate a policy that involves the development of a funding system to substitute to part of the projected increase in the contribution rate, both under deterministic and stochastic demographic forecasts

Keywords: Computable General Equilibrium Models; International capital flows; Life cycle models and saving; Demographic trends and forecasts (search for similar items in EconPapers)
JEL-codes: C68 D91 F21 J11 (search for similar items in EconPapers)
Date: 2008-10
New Economics Papers: this item is included in nep-age, nep-cmp and nep-eec
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Persistent link: https://EconPapers.repec.org/RePEc:cii:cepidt:2008-22

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