The graying of global population and its macroeconomic consequences

This article examines the nature and magnitude of population forecasts and reviews evidence on the effects of population ageing on national economic performance. Although population ageing is certainly occurring and will have potentially profound implications for a variety of macroeconomic issues, the paper argues that it will likely have a relatively modest effect on economic growth. The authors underline the concurrent declines in youth dependency and the increases in female labour force participation and human capital accumulation as critical reasons for that modest growth. In addition, it points that behavioural and policy responses to population ageing also suggest that population ageing will not significantly impede economic growth.

The main findings of the paper are that:

• there are three main drivers of population ageing: age dynamics, fertility decline, and longevity increase
• developed and developing countries will have to adopt different approaches to addressing age-related issues if they want to provide economic security of the elderly
• the major challenge is the design and implementation of health and social security programs in particular 
• in addition, significant policy efforts and reform will be required to ensure the long-term sustainability of these programs 
• international migration policies have the potential to enhance the economic effects of population ageing by allowing some of the young workers in labour-abundant developing countries to move to the more rapidly ageing developed world

 
The paper concludes that there is no reason to believe that ageing will become a major burden for economic growth in the foreseeable future. Indeed, as long as the private and public sector are flexible enough to adjust to the newly emerging societal structures, ageing is unlikely to have much effect on economic growth.