Transmission of Demographic Shock Effects from Large to Small

Turalay Kenc and Serdar Sayan ()

GE, Growth, Math methods from EconWPA

Abstract: This paper addresses an issue that has been overlooked in the literature on the effects of population ageing: Transmission onto small countries of the economic effects of population ageing, a natural, demographic outcome of the shock that many large industrial countries experienced in the form of a baby boom in the late 1940s and early 1950s. It is argued in the paper that international commodity and capital flows provide channels for the transmission of these effects that include changes in the terms of trade and interest rates in large countries. The issue is considered in the context of possible effects on Turkey of the demographic shock effects transmitted from Europe. The discussion is carried out in reference to the simulation results from an overlapping generations, general equilibrium model parametrised to mimic the current state of four largest members of the EU and Turkey. The simulation exercises lead to the following conclusions: First, changes in the age composition of Turkish population to occur in the course of the country’s own demographic transition will affect the time paths of consumption, savings, investment and output substantially. Secondly, when they are transmitted onto Turkey, the economic effects of baby boomers’ ageing in the EU will magnify the effects of the demographic transition in this country. This is a finding with implications for long term growth prospects of a country, and appears to be relevant to other small countries whose close economic ties with the industrial nations with ageing populations make them vulnerable to the effects of population ageing even if they have relatively young populations now.

Keywords: Demographic Shocks and Ageing Populations; Overlapping Generations; General Equilibrium; Simulation Models; Turkey and the EU. (search for similar items in EconPapers)
JEL-codes: C68 F10 F20 F40 J10 J26 (search for similar items in EconPapers)
Date: 1998-04-01
Note: Type of Document - PostScript Document; prepared on IBM PC; to print on HP 6MP/PostScript; pages: 20 ; figures: Submitted in EPS Format (FIG1.EPS thru FIG5.EPS). Text was originally prepared in Word for Windows 6.0 and submitted via ftp in PS format. Figures were originally created in TeX and submitted via ftp in EPS format.
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpge:9804001

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