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Income growth in the 21st century: Forecasts with an overlapping generations model

David de la Croix (), Frédéric Docquier () and Philippe Liegeois

No 2007043, CORE Discussion Papers from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: We forecast income growth over the period 2000-2050 in the US, Canada, and France. To ground the forecasts on relationships that are as robust as possible to changes in the environment, we use a quantitative theoretical approach which consists in calibrating and simulating a general equilibrium model. Compared to existing studies, we allow for life uncertainty and migrations, use generational accounting studies to link taxes and public expenditures to demographic changes, and take into account the interaction between education and work experience. Forecasts show that growth will be weaker over the period 2010-2040. The gap between the US and the two other countries is increasing over time. France will catch-up and overtake Canada in 2020. Investigating alternative policy scenarios, we show that increasing the effective retirement age to 63 would be most profitable for France, reducing its gap with the US by one third. A decrease in social security benefits would slightly stimulate growth but would have no real impact on the gap between the countries.

Keywords: aging; forecast; computable general equilibrium; education; experience (search for similar items in EconPapers)
JEL-codes: D58 E6 H55 J11 O40 (search for similar items in EconPapers)
Date: 2007-07-01
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Journal Article: Income growth in the 21st century: Forecasts with an overlapping generations model (2007) Downloads
Working Paper: Income growth in the 21st century: Forecasts with an overlapping generations model (2007) Downloads
Working Paper: Income Growth in the 21st century: forecasts with an overlapping generations model (2007) Downloads
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