Demographics, Immigration, and Market Size

Koichi Fukumura, Kohei Nagamachi, Yasuhiro Sato and Kazuhiro Yamamoto
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Kohei Nagamachi: The Graduate School of Management, Kagawa University
Yasuhiro Sato: Faculty of Economics, The University of Tokyo
Kazuhiro Yamamoto: Graduate School of Economics, Osaka University

No CIRJE-F-1059, CIRJE F-Series from CIRJE, Faculty of Economics, University of Tokyo

Abstract: This paper constructs an overlapping generations model wherein people decide their number of children and levels of consumption for di¤erentiated goods. We further assume that immigration takes place according to the utility di¤erence between inside and outside a country. We show that an improvement in longevity has three e¤ects on the market size and welfare: First, it decreases the number of children. Second, it increases the per capita expenditure on consumption. Finally, it increases immigration. The …rst e¤ect has negative impacts on the market size and welfare whereas the latter two e¤ects have positive impacts. We then calibrate our model to match Japanese and U.S. data from 1955 to 2014 and …nd that the negative e¤ects dominate the positive ones. Moreover, our counterfactual analyses show that accepting immigration in Japan can be useful in overcoming population and market shrinkage caused by an aging population.

Pages: 35 pages
Date: 2017-07
New Economics Papers: this item is included in nep-age and nep-dge
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Related works:
Journal Article: Demographics, immigration, and market size (2020)
Working Paper: Demographics, Immigration, and Market Size (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:tky:fseres:2017cf1059

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