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on Demographic Economics |
| By: | David de la Croix; Matthias Doepke |
| Abstract: | A long-standing challenge for welfare economics is to develop welfare criteria that can be applied to allocations with different population levels. Such a criterion is essential to resolve the optimal population problem, i.e., the tradeoff between population size and the welfare of each person alive. A welfare criterion that speaks to this issue inherently requires evaluating the welfare of nonexistent people, because some people exist only in some allocations but not in others. To make progress, we consider the population problem in an environment where population is variable, but there is a fixed supply of souls, who may experience multiple incarnations over time. Rather than pondering the value of nonexistence, from the souls' perspective comparing larger or smaller populations merely involves valuing shorter or longer waits until the next incarnation. We argue that such comparisons are possible on the basis of introspection and lead to intuitive welfare criteria with attractive properties. We emphasize that one does not have to believe in reincarnation to accept the resulting criteria; rather, reincarnation serves as a metaphor to facilitate the necessary utility comparisons. |
| JEL: | D63 H43 J11 Q56 |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28554&r=all |
| By: | Pol Antras (Harvard University and CEPR and NBER); Stephen J Redding (Princeton University and CEPR and NBER); Esteban Rossi Hansberg (Princeton University and CEPR and NBER) |
| Abstract: | We develop a model of human interaction to analyze the relationship between globalization and pandemics.Our framework provides joint microfoundations for the gravity equation for international trade and the Susceptible-Infected-Recovered (SIR) model of disease dynamics. We show that there are cross-country epidemiological externalities, such that whether a global pandemic breaks out depends critically on the disease environment in the country with the highest rates of domestic infection. A deepening of global integration can either increase or decrease the range of parameters for which a pandemic occurs,and can generate multiple waves of infection when a single wave would otherwise occur in the closed economy. If agents do not internalize the threat of infection, larger deaths in a more unhealthy country raise its relative wage, thus generating a form of general equilibrium social distancing. Once agents internalize the threat of infection, the more unhealthy country typically experiences a reduction in its relative wage through individual-level social distancing. Incorporating these individual-level responses is central to generating large reductions in the ratio of trade to output and implies that the pandemic has substantial effects on aggregate welfare, through both deaths and reduced gains from trade. |
| Keywords: | COVID-19 |
| JEL: | F60 I18 |
| Date: | 2020–09 |
| URL: | http://d.repec.org/n?u=RePEc:pri:cepsud:267&r=all |
| By: | Chu, Chin-Peng (Asian Development Bank Institute); Yeh, Kuo-Chun (Asian Development Bank Institute) |
| Abstract: | As an economy with a population of 23 million, Taipei,China is enjoying the demographic dividend of economic growth resulting from a shift in the population age structure, but an increasingly aged population could be bad for the economy. As an international comparison, its population is aging faster than that of most members of the Asian Development Bank and other advanced economies. Based on the literature, we evaluate the impact of aging on economic growth and volatility using relevant data and then concludes with the government policies relevant to the prospective aging problem. At the current stage, the situation is not as bad as expected. An aging workforce with positive productivity has no negative impact on economic growth. The old-age dependency ratio has a significantly negative effect on economic development, but appropriate foreign labor immigration and elderly long-term care policies can mitigate it. Higher education attainment still works to support economic growth in the long run. Besides, an increase in longevity first enhances and then erodes net foreign assets, and high old-age dependency ratios cause investments to respond strongly to technology shocks because individuals prefer to save more for retirement in aging societies. However, population aging has a minor influence on the dynamics of the macroeconomic variables. Nevertheless, the government should be cautious and allocate resources to help labor-intensive and low-skilled industries transform into more innovation-oriented and knowledge-intensive ones. Social welfare support must also become an important aspect of the social security framework. |
| Keywords: | population aging; economic growth; net foreign assets; demographic policy; health care; Taipei; China |
| JEL: | J11 J18 |
| Date: | 2021–03–05 |
| URL: | http://d.repec.org/n?u=RePEc:ris:adbiwp:1222&r=all |
| By: | Giacomo De Giorgi; Luca Gambetti; Costanza Naguib |
| Abstract: | Life expectancy for Blacks is about 8 year shorter than for Whites. A shorter life expectancy, in line with the theoretical prediction of a simple model, determines a much lower amount of savings and wealth accumulation and therefore a lower degree of insurance. This, in turn, contributes to persistent racial differentials in life-cycle consumption. Starting from the same position in the consumption distribution Blacks end up in a lower percentile than Whites after a few decades. This is particularly marked for those Blacks who start at the top of the consumption distribution, where Whites are much more per- sistent. We document these facts using 40 years of PSID data (1981-2017). |
| Keywords: | Consumption, Income, Earnings persistence, quintile transitions |
| JEL: | E21 E63 D12 C3 |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:ube:dpvwib:dp2103&r=all |
| By: | Sascha O. Becker; Volker Lindenthal; Sharun Mukand; Fabian Waldinger |
| Abstract: | We study the role of professional networks in facilitating the escape of persecuted academics from Nazi Germany. From 1933, the Nazi regime started to dismiss academics of Jewish origin from their positions. The timing of dismissals created individual-level exogenous variation in the timing of emigration from Nazi Germany, allowing us to estimate the causal effect of networks for emigration decisions. Academics with ties to more colleagues who had emigrated in 1933 or 1934 (early émigrés) were more likely to emigrate. The early émigrés functioned as “bridging nodes” that helped other academics cross over to their destination. Furthermore, we provide some of the first empirical evidence of decay in social ties over time. The strength of ties also decays across space, even within cities. Finally, for high-skilled migrants, professional networks are more important than community networks. |
| Keywords: | professional networks, high-skilled emigration, Nazi Germany, Jewish academics, universities |
| JEL: | I20 I23 I28 J15 J24 N30 N34 N40 N44 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_8916&r=all |
| By: | Christian Gollier (Toulouse School of Economics, University of Toulouse-Capitole) |
| Abstract: | Because of risk aversion, any sensible investment valuation system should value less projects that contribute more to the aggregate risk, i.e., that have a larger income elasticity of net benefits. In theory, this is done by adjusting discount rates to consumption betas. But in reality, for various reasons (Arrow-Lind and WACC fallacies, market failures), most public and private institutions and people use a discount rate that is rather insensitive to the risk profile of their investment projects. I show in this paper that the economic consequences of the implied misallocation of capital are dire. To do this, I calibrate a Lucas model in which the investment opportunity set contains a myriad of projects with different expected returns and risk profiles. The welfare loss of using a single discount rate is equivalent to a permanent reduction in consumption that lies somewhere between 15% and 45%, depending upon which familiar discounting system is used. Economists should devote more energy to support a reform of public discounting systems in favor of what has been advocated by the normative interpretation of modern asset pricing theories over the last four decades. |
| Keywords: | Discounting, Investment Theory, Asset Pricing, Carbon Pricing, Arrow-Lind Theorem, WACC Fallacy, Rare Disasters, Capital Budgeting |
| JEL: | G12 H43 Q54 |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2021.03&r=all |
| By: | Korwatanasakul, Upalat (Asian Development Bank Institute); Sirivunnabood, Pitchaya (Asian Development Bank Institute); Majoe, Adam (Asian Development Bank Institute) |
| Abstract: | Many economies in East and Southeast Asia are progressing toward becoming aging or aged societies. The impacts of this demographic transition are multifaceted and far-reaching and include declining tax revenues, leading to fiscal imbalances, and possible increases in government expenditures for coping with care expenses and pension schemes. We provide insights into ways to balance fiscal revenue against costly pension and social security systems and increasing healthcare expenditures. Using panel data for 178 countries across 18 years to capture the state of fiscal balance and data on demographic transition, we estimate three models to analyze the relationships between (i) demographic transition and government balance, (ii) demographic transition and government health expenditure, and (iii) demographic transition and government debt. The results first establish that health expenditure is negatively associated with the government balance. Then, for the relationship between demographic transition and health expenditure, old-age dependency and the share of the population aged over 64 shows a significant positive relationship with health expenditure. We find that demographic transition does not have a direct effect on the government balance, but instead has an indirect effect through higher government expenditure. This can be explained by the high costs of treating health conditions related to old age, including chronic illnesses. Our findings provide important implications for fiscal sustainability and necessitate comprehensive reviews of public health spending; healthcare reforms that prioritize accessibility for all and efficiency in healthcare services; and cost-sharing measures to mitigate the age-related fiscal burden. These measures will be particularly important in dealing with the impacts of the coronavirus disease (COVID-19) pandemic, to which the elderly are particularly vulnerable. |
| Keywords: | demographic transition; population aging; fiscal balance; fiscal sustainability |
| JEL: | H30 H51 H55 J11 J14 J18 |
| Date: | 2021–03–03 |
| URL: | http://d.repec.org/n?u=RePEc:ris:adbiwp:1220&r=all |