ECONOMIC POLICY IMPLICATIONS OF WORLD DEMOGRAPHIC CHANGE

Global demographic shifts over the next 50 years will affect the world economy in many ways. Although some changes may be beneficial, others may create economic challenges for policymakers to address.

“Economic Policy Implications of World Demographic Change,” explores potential demographic changes over the next 50 years. The article, by economist Richard Johnson, is featured in the first quarter edition of The Economic Review.

The author finds changes that may have significant economic effects: many developing countries expect the working-age share of their populations to increase, and many developed countries and China expect rapid aging of their populations.

Johnson writes that government policies will greatly affect the consequences of demographic change in developing countries. In particular, he writes, developing countries can achieve more rapid economic growth, despite high rates of population growth, if their governments create better-functioning markets and protect property rights more effectively.

Developed countries, meanwhile, have less potential to escape the problems of population aging through policy changes, Johnson writes, as all plausible reforms to government pension and health insurance systems would hurt some individuals. He notes that studies of possible reforms also show that policymakers’ approaches to pension reforms will greatly affect the distribution of gains and losses from these reforms and the level of economic output in the long run.

          The article and past editions of the Economic Review are available on the Bank’s Web site at www.kansascityfed.org.

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