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A method for socially evaluating the effects of long-run demographic paths on living standards

Author

Listed:
  • Nick Parr

    (Macquarie University)

  • Ross Guest

    (Griffith University)

Abstract

Background: The paper is motivated by the need for improved social evaluation of prospective demographic change in order to better inform policies that are designed to reduce the very long-run costs of population ageing and to achieve sustainable economic development. Objective: What is the very long-run social value of a given demographic path? What is the value of changes in mortality, immigration, fertility, and labour force participation? How important are shorter-term demographic changes relative to very long-term effects in determining the social value of the demographic path? Methods: A new simulation method is applied for socially evaluating demographic paths, by separating a demographic path into a stable population component and a transition path component. Sensitivity analyses are conducted with respect to demographic assumptions, labour force participation assumptions, and consumption needs by age, returns to scale, and intergenerational value judgements. Results: The application to Australia shows the considerable social cost, in terms of the loss of discounted consumption per capita, of improvements in mortality and gains from higher immigration and increased participation. The effect of fertility, however, is very sensitive to assumptions about the age-specific consumption needs of the population and social value judgements about intergenerational equity. Conclusions: Our method socially evaluates the very long-run implications of specified constant fertility, mortality, and migration, giving consideration to both the transition path and the ultimate stable state. Mortality improvement is costly and higher immigration is beneficial. The impact of higher fertility is sensitive to assumptions about consumption needs and intergenerational equity.

Suggested Citation

  • Nick Parr & Ross Guest, 2014. "A method for socially evaluating the effects of long-run demographic paths on living standards," Demographic Research, Max Planck Institute for Demographic Research, Rostock, Germany, vol. 31(11), pages 275-318.
  • Handle: RePEc:dem:demres:v:31:y:2014:i:11
    DOI: 10.4054/DemRes.2014.31.11
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    Cited by:

    1. Nick Parr & Ross Guest, 2020. "Migrant Age Profiles and Long‐Run Living Standards in Australia," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 53(2), pages 183-197, June.
    2. Abdul, Salman & Masih, Mansur, 2018. "Relationship between demography and economic growth from the islamic perspective: a case study of Malaysia," MPRA Paper 108463, University Library of Munich, Germany.
    3. Nick Parr, 2021. "A New Measure of Fertility Replacement Level in the Presence of Positive Net Immigration," European Journal of Population, Springer;European Association for Population Studies, vol. 37(1), pages 243-262, March.
    4. Rahman, Salman & Masih, Mansur, 2018. "Demography and economic growth from islamic perspective: Malaysia as a case study," MPRA Paper 105595, University Library of Munich, Germany.

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    More about this item

    Keywords

    Australia; labor force; population policy; population projection; population aging; methodology; social evaluation; population economics;
    All these keywords.

    JEL classification:

    • J1 - Labor and Demographic Economics - - Demographic Economics
    • Z0 - Other Special Topics - - General

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