David Bloom, Clarence James Gamble Professor of Economics & Demography and Chair, Department of Global Health & Population, Harvard School of Public Health.

David Canning, Professor of Economics and International Health, Department of Global Health and Population, Harvard School of Public Health.

Günther Fink, Assistant Professor of International Health Economics, Department of Global Health and Population, Harvard School of Public Health Commission on Growth and Development, 2008

Abstract

“……Between 2000 and 2050, the share of the population aged 60 and over is projected to increase in every country in the world; the same is true for the 80+ population in all but one country (Mali). Worldwide, the largest absolute increases are yet to come.

Although labor force participation rates are projected to decline from 2000 to 2040 in most countries, due mainly to changes in their age distributions, labor force-to-population ratios will actually increase in most countries. This is because low fertility will cause lower youth dependency that is more than enough to offset the skewing of adults toward the older ages at which labor force participation is lower. The increase in labor-force-to-population ratios will be further magnified by increases in age-specific rates of female labor force participation associated with fertility declines. These factors suggest that economic growth will continue apace, notwithstanding the phenomenon of population aging.

For the OECD countries, the declines projected to occur in both labor force participation and labor-force-to-population ratios suggest modest declines in the pace of economic growth. But even these effects can be mitigated by behavioral responses to population aging—in the form of higher savings for retirement, greater labor force participation, and increased immigration from labor-surplus to labor-deficit countries.

Countries that can facilitate such changes may be able to limit the adverse consequences of population aging. When seen through the lens of several mitigating considerations, there is reason to think that population aging in developed countries may have less effect than some have predicted. In addition, policy responses related to retirement incentives, pension funding methods, investments in health care of the elderly, and immigration can further ameliorate the effect of population aging on economic growth…..

Contents

I. Introduction
II. Population Aging: Facts, Force, and Future
III. The Economic Impacts of Population Aging
IV. Summary and Discussion
References

This working paper is a product of the Commission on Growth and Development, which is sponsored by the following organizations:

Australian Agency for International Development (AusAID)

Dutch Ministry of Foreign Affairs

Swedish International Development Cooperation Agency (SIDA)

U.K. Department of International Development (DFID)

The William and Flora Hewlett Foundation

The World Bank Group