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Economic Implications Of An Aging Population: The Case Of Five Asian Economies

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  • SHIMASAWA Manabu
  • HOSOYAMA Hidetoshi

Abstract

This paper constructs a stylized general equilibrium overlapping generations model in which child-rearing costs are modeled explicitly to evaluate quantitatively the effects of a demographic transition in five Asian economies: Japan, China, Korea, Taiwan, and Singapore. The model looks at two key points: (i) how both aggregate variables and inter-generational welfare are affected, and (ii) the extent to which the policy reform reduces the negative effects it gives rise to. With this in mind, we simulate for two scenarios: a benchmark scenario and a policy change scenario. The simulation results indicate that population aging could have a major impact on savings rate, factor prices, and economic welfare. Especially important is the conclusion that population aging will lead to the end of Asia's high economic growth rates. But our simulation results also indicate that policy reform could reduce the negative effects. JEL classification: C68; E27; H55; J11

Suggested Citation

  • SHIMASAWA Manabu & HOSOYAMA Hidetoshi, 2004. "Economic Implications Of An Aging Population: The Case Of Five Asian Economies," ESRI Discussion paper series 117, Economic and Social Research Institute (ESRI).
    • Handle: RePEc:esj:esridp:117
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    File URL: http://www.esri.go.jp/jp/archive/e_dis/e_dis120/e_dis117a.pdf
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    1. Bouzahzah, Mohamed & De la Croix, David & Docquier, Frederic, 2002. "Policy reforms and growth in computable OLG economies," Journal of Economic Dynamics and Control, Elsevier, vol. 26(12), pages 2093-2113, October.
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    5. Kato, Ryuta Ray, 2002. "Government Deficit, Public Investment, and Public Capital in the Transition to an Aging Japan," Journal of the Japanese and International Economies, Elsevier, vol. 16(4), pages 462-491, December.
    6. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
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    Cited by:

    1. Wen-Hsin Huang & Yen-Ju Lin & Hsien-Feng Lee, 2019. "Impact of Population and Workforce Aging on Economic Growth: Case Study of Taiwan," Sustainability, MDPI, vol. 11(22), pages 1-13, November.

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    More about this item

    Keywords

    aging; policy reform; overlapping generations; Asian economy;
    All these keywords.

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts

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