Abstract
There are significant effects of changing demographics on economic indicators: not only growth in GDP but also the current account balance and gross capital formation. The 15–24 age group is one of the key age groups in these effects, with increases in that age group exerting strong positive effects on GDP growth, and negative effects on the CAB and GCF. There have been major shifts in the share of the population aged 15–24 during the past half century or more, and 80% of these globally coincide with declines in GDP growth. This appears to have been the pattern in four financial crises since 1980 as well as Japan’s “lost decade.” The effect is even more pronounced for the 2008–2009 period.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
Notes
See, for example, Easterlin (1996).
It must be emphasized that the inclusion of the full age distribution—including infants and children—in a more aggregated model does not in any way imply or necessitate decision-making on the part of children themselves, with regard to their patterns of consumption. It simply allows for the fact that children in one household might affect the spending patterns of individuals in other age groups and/or households.
For a more complete description of the derivation of the model, please see the appendix in Macunovich (2009).
Some comparison can be made here with findings in Feyrer (2007, 2008), who imputes a significant positive effect on output of first differences in the share of the work force aged 40–49, with a negative coefficient on the share aged 20–29. There are a few differences in approach here, in that this study uses rates of change, rather than first difference, in population shares and uses slightly different age groupings (45–54 and 15–24). In addition, Feyrer looks only at the workforce aged 10–69, rather than the full population and age groups, as in this paper. However, the results in Table 3 and in Fig. 3 also show a significant positive effect of the 45–54 group. Direct comparisons for the 15–24 group cannot be made, however, since Feyrer’s negative coefficient on the 20–29 age group simply indicated that the coefficient on the 20–29 age group was less than that on the 40–49 group. This is supported by the finding in column 2 of Table 2, although the difference is slight.
For comparison, no other age group showed any significant effect on GDP, except the US and OECD.
Again, for comparison, in this case, no other age group showed any significant effect, for any country group.
References
Almon S (1965) The distributed lag between capital appropriations and expenditures. Econometrica 33:178–196
Bloom DE, Finlay JE (2009) Demographic change and economic growth in asia. Asian Econ Rev 4:45–64
Bloom DE, Williamson JG (1998) Demographic transitions and economic miracles in emerging asia. World Bank Econ Rev 12(3):419–455
Calvo G (2000) Balance-of-payments crises in emerging markets. In: Krugman A (ed) Currency crises. University of Chicago Press, Chicago, pp 71–104
David MH (1962) Family composition and consumption. North-Holland Publishing, Amsterdam
Della Vigna S, Pollet JM (2007) Demographics and industry returns. Am Econ Rev 97(5):1667–1702
Easterlin RA (1996) Growth triumphant: the twenty-first century in historical perspective. University of Michigan Press, Ann Arbor
Fair RC, Dominguez K (1991) Effects of the changing U.S. age distribution on macroeconomic equations. Am Econ Rev 81(5):1276–1294
Feyrer J (2007) Demographics and productivity. Rev Econ Stat 89(1):100–109
Feyrer J (2008) Aggregate evidence on the link between demographics and productivity. Popul Dev Rev 34:78–99
Galbraith JK (1958) The dependence effect. The Affluent Society. Houghton-Mifflin, Boston
Higgins M (1998) Demography, national savings, and international capital flows. Int Econ Rev 39(2):343–369
Higgins M, Williamson JG (1997) Age structure dynamics in asia and dependence on foreign capital. Popul Dev Rev 23(2):262–293
Judge GG, Griffiths WE, Carter-Hill R, Lütkepohl H, Lee TC (1985) The theory and practice of econometrics, 2nd edn. Wiley, New York
Keynes JM (1937) Some economic consequences of a declining population. Eugen Rev 29(1):13–17
Macunovich DJ (2007) Effects of changing age structure and intergenerational transfers on patterns of consumption and saving. In: Gauthier A, Chu C, Tuljapurkar S (ed) Allocating public and private resources across generations. Springer, Dordrecht, pp 243–277
Macunovich DJ (2009) The role of demographics in precipitating crises in financial institutions. IZA Discussion Paper No. 4436
Milesi-Feretti GM, Razin A (2000) Current account reversals and currency crises: empirical regularities. In: Krugman A (ed) Currency crises. University of Chicago Press, Chicago
Pesenti P, Tille C (2000) The Economics of Currency Crises and Contagion: an Introduction. FRBNY Economic Policy Review September, p 3–16
Schumpeter JA (1946) The American economy in the interwar period: the decade of the twenties. Am Econ Rev 36:1–10
United Nations (1999) World Population 1950–2050 (the 1998 Revision). United Nations, New York, Diskette
Unites States Bureau of the Census (1996) Diskette, U.S. Population by Single Year of Age, 1900–1995 and Projections to 2050. July 1, 1996
World Bank Group (2007) World Development Indicators (WDI). online at http://ddp-ext.worldbank.org/ext/DDPQQ/member.do?method=getMembers&userid=1&queryId=135
Acknowledgements
This paper has benefitted greatly from the extremely useful suggestions received from two anonymous referees. I am very grateful for the time they have spent with the paper.
Author information
Authors and Affiliations
Corresponding author
Additional information
Responsible editor: Junsen Zhang
Rights and permissions
About this article
Cite this article
Macunovich, D.J. The role of demographics in precipitating economic downturns. J Popul Econ 25, 783–807 (2012). https://doi.org/10.1007/s00148-010-0329-5
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s00148-010-0329-5