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The world’s interconnected demographic/fiscal transition

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  • Fehr, Hans
  • Jokisch, Sabine
  • Kotlikoff, Laurence J.

Abstract

Will incomes of low and high skilled workers continue to diverge? Yes, according to our paper’s dynamic, six-good, five-region – U.S., Europe, N.E. Asia (Japan, Korea, Taiwan, Hong Kong), China, and India, general equilibrium, life-cycle model. The model, which endogenizes specialization and features incomplete factor-price equalization, predicts a near doubling of the ratio of high- to low-skilled wages over the century. Increasing wage inequality arises from a traditional source – a rising worldwide relative supply of unskilled labor, reflecting Chinese and Indian productivity catchup. But growing wage inequality can be greatly mitigated if China and India dramatically improve the skill mix of successive cohorts via improved education.

Suggested Citation

  • Fehr, Hans & Jokisch, Sabine & Kotlikoff, Laurence J., 2013. "The world’s interconnected demographic/fiscal transition," The Journal of the Economics of Ageing, Elsevier, vol. 1, pages 35-49.
    • Handle: RePEc:eee:joecag:v:1-2:y:2013:i::p:35-49
    DOI: 10.1016/j.jeoa.2013.07.002
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    1. K. V. Nesterova, 2018. "Multiregional Models of General Equilibrium: Framework and Applications," Administrative Consulting, Russian Presidential Academy of National Economy and Public Administration. North-West Institute of Management., issue 12.
    2. Attanasio, O. & Bonfatti, A. & Kitao, S. & Weber, G., 2016. "Global Demographic Trends," Handbook of the Economics of Population Aging, in: Piggott, John & Woodland, Alan (ed.), Handbook of the Economics of Population Aging, edition 1, volume 1, chapter 0, pages 179-235, Elsevier.
    3. Nesterova, Kristina (Нестерова, Кристина), 2018. "The Construction of a Global General Equilibrium Model for the Russian Economy Based on International Experience [Построение Глобальной Модели Общего Равновесия Для Российской Экономики На Основе М," Working Papers 021807, Russian Presidential Academy of National Economy and Public Administration.

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