Demographic changes and economic growth: a macroeconomic projection for 2020

Exploring the economic consequences of demographic changes is often carried out within simple accounting frameworks. Such approaches consist of projecting the impact of ageing on social security expenditures under exogenous assumptions about economic growth, productivity, wages and employment. Alternative attempts to consider richer interactions between economic and demographic variables are carried out with calibrated computable general equilibrium models with overlapping generations. These models are basically neoclassical. Up to now in France, this question seldom has been examined with macroeconometric models of keynesian inspiration. Studying the results provided by such models for France may therefore be of interest. This is the purpose of this work, which presents an economic outlook for 2020 carried out with MESANGE macroeconometric model. This model has short term keynesian and long term neo-classical properties. This exercise integrates the impact of demographic changes on savings, consumption, social expenditures and disequilibrium on the labour market. Labour force projections and the natural dynamics of the model lead to employment levels that remain insufficient to ensure balance in social accounts. Additional taxes would therefore be required. Two possibilities are explored: the CSG or Generalized Social Contribution (a constant tax rate on capital and labor income) or employers and employees social contributions (with or without an impact of employees contributions on the fiscal wedge). The model predicts that the level of employment is less penalised by the former modality. We also explore the consequences of tougher conditions to get full pensions which, at the 2020 horizon, would lead to a one-year increase of the age of new retirees. In this case, the increase of the CSG that would be required to meet Maastricht criteria amounts to 4.3 points. Choosing between CSG and social contributions might nevertheless depend on other considerations, such as their incidence on the relative standards of living of workers and pensioners, or the wish to keep a strong correspondence between pension benefits and contributions paid during working life.