The Phenomenon of Population Aging: Major Economic Effects

Феномен старения населения: экономические эффекты

Kapeliushnikov, Rostislav I. (Капелюшников, Ростислав И.) ()
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Kapeliushnikov, Rostislav I. (Капелюшников, Ростислав И.): Primakov National Research Institute of World Economy and International Relations

Ekonomicheskaya Politika / Economic Policy, 2019, vol. 3, 8-53

Abstract: Today most countries are experiencing fast population aging, which is going to last the entire 21st century. Its economic effects are multifarious and will in large part shape further dynamics of the global economy not only in the short or medium but also in the long run. Unfortunately, Russian economists and politicians are hardly aware of how diverse economic consequences of population aging are since their attention is focused on its narrow, purely pragmatic, dimensions (such as the raising of pension age, the deficit of the Russian Pension Fund etc.). The paper provides a broad overview of major economic effects of population aging from both theoretical and empirical perspectives. It examines the place of aging in the process of demographic transition, and forecasts its expected trends in subsequent decades for a few countries including Russia. Next, it critically reviews different versions of dependency/support ratios: demographic and economic; chronological and prospective; non-adjusted and adjusted for differences by age in labor income and per capita consumption. Special attention is paid to a basic scheme of relationships between key demographic and macroeconomic variables that highlights how population aging might affect employment, labor productivity, capital intensity, wages, returns to capital, investment and savings. Some additional effects are also analyzed, such as prospective changes in labor supply, human capital accumulation, technological change, real interest, and inflation. A general conclusion is that population aging is not per se a fundamental economic challenge that should endanger society’s welfare. Real dangers arise from existing institutions providing support for the elderly, which were established in the early to mid 20th century under completely different demographic and economic conditions.

Keywords: demography; population aging; dependency ratios; consumption; saving; labor market; pension systems (search for similar items in EconPapers)
JEL-codes: H55 J10 J11 J14 J21 J26 (search for similar items in EconPapers)
Date: 2019
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