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Population Aging and the Possibility of a Middle-Income Trap in Asia

Author

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  • Ha, Joonkyung

    (Hanyang University)

  • Lee , Sang-Hyop

    (University of Hawaii at Manoa)

Abstract

We present three conditions for a demography-driven middle-income trap and show that many economies in East, South, and Southeast Asia satisfy all of them. The conditions are (1) support ratio— the ratio of workers to consumers—matters for economic growth, (2) economic development accompanies more investment in human capital and lower fertility due to the quantity–quality tradeoff, and (3) current low level of fertility corresponds to too low support ratios for keeping up with the frontier economies in the long run. The panel analyses for 178 countries, among which 30 are ADB developing member economies, show that (i) and (ii) are satisfied for Asia with higher elasticity than others. As for (iii), we set up a dynamic model for simulations, showing that about two-thirds of ADB members have unsustainable level of support ratios, implying possibilities of a middle-income trap due to demographic headwinds in the future.

Suggested Citation

  • Ha, Joonkyung & Lee , Sang-Hyop, 2018. "Population Aging and the Possibility of a Middle-Income Trap in Asia," ADB Economics Working Paper Series 536, Asian Development Bank.
    • Handle: RePEc:ris:adbewp:0536
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    References listed on IDEAS

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    1. Robert L. Clark & Naohiro Ogawa & Andrew Mason (ed.), 2007. "Population Aging, Intergenerational Transfers and the Macroeconomy," Books, Edward Elgar Publishing, number 12608.
    2. Andrew Mason & Ronald Lee & Sang-Hyop Lee, 2010. "The Demographic Transition and Economic Growth in the Pacific Rim," NBER Chapters, in: The Economic Consequences of Demographic Change in East Asia, pages 19-55, National Bureau of Economic Research, Inc.
    3. Donghyun Park & Sang-Hyop Lee & Andrew Mason (ed.), 2012. "Aging, Economic Growth, and Old-Age Security in Asia," Books, Edward Elgar Publishing, number 15088.
    4. Mason, Andrew & Kinugasa, Tomoko, 2008. "East Asian economic development: Two demographic dividends," Journal of Asian Economics, Elsevier, vol. 19(5-6), pages 389-399.
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    Cited by:

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    2. Jun, Hankyung, 2020. "Social security and retirement in fast-aging middle-income countries: Evidence from Korea," The Journal of the Economics of Ageing, Elsevier, vol. 17(C).

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    More about this item

    Keywords

    demography; fertility; middle-income trap; national transfer accounts; support ratio;
    All these keywords.

    JEL classification:

    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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