Assessing the impact of long-term global demographic changes on the Dutch economy and trade

Donal Smith, Tony Huang and Dennis Dlugosch

No 1830, OECD Economics Department Working Papers from OECD Publishing

Abstract: Demographic trends are altering the size of working-age populations globally. This will result in a smaller labour force in the Netherlands and most OECD countries. By contrast, the labour force is expected to grow in many other, currently developing, countries. These expected changes in global labour supply may affect the international demand addressed to the Dutch economy, its access to imports and its competitiveness. To capture these effects, a global general equilibrium trade model (METRO) is used to simulate the impact of changes in the working age population and migration flows over 2022-2050. Our results suggest that the level of GDP in the Netherlands will be around 2.3% lower than in a scenario with no demographic change. While a moderate demographic decline is expected for the Netherlands, trade flows will be negatively affected by sizable workforce declines in Germany and China. At the sector level, some sectors in the Netherlands such as electronics and other manufacturing sectors are most exposed to demographic changes through changes in import demand and intermediate sourcing, while other parts of manufacturing, in particular the pharmaceutical and chemical sectors, are most exposed through changing export opportunities. More immigration could mitigate the negative effect of demographic change on most sectors in the Netherlands. This could be further enhanced if immigration focused on higher-skilled workers.

Keywords: Computable general equilibrium model; Demographics; International Trade; METRO model; Migration; Netherlands; Sectoral economic effects (search for similar items in EconPapers)
JEL-codes: C63 E10 F22 F47 J11 N10 (search for similar items in EconPapers)
Date: 2024-12-18
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Persistent link: https://EconPapers.repec.org/RePEc:oec:ecoaaa:1830-en

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