Demographics, Wealth, and Global Imbalances in the Twenty-First Century

Adrien Auclert, Hannes Malmberg, Frederic Martenet and Matthew Rognlie

No 16470, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We use a sufficient statistic approach to quantify the general equilibrium effects of population aging on wealth accumulation, expected asset returns, and global imbalances. Combining population forecasts with household survey data from 25 countries, we measure the compositional effect of aging: how a changing age distribution affects wealth-to-GDP, holding the age profiles of assets and labor income fixed. In a baseline overlapping generations model this statistic, in conjunction with cross-sectional information and two standard macro parameters, pins down general equilibrium outcomes. Since the compositional effect is positive, large, and heterogeneous across countries, our model predicts that population aging will increase wealth-to-GDP ratios, lower asset returns, and widen global imbalances through the twenty-first century. These conclusions extend to a richer model in which bequests, individual savings, and the tax-and-transfer system all respond to demographic change.

JEL-codes: E21 F21 J11 (search for similar items in EconPapers)
Date: 2021-08
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Working Paper: Demographics, Wealth, and Global Imbalances in the Twenty-First Century (2021)
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