Archive for the ‘Demographics/Pension’ Category

Marriage Matching over Five Centuries in China

November 7, 2022

Carol H. Shiue & Wolfgang Keller in the new NBER research

Where do they get data for 5 centuries?
The study uses genealogical data from biographies of seven extended families (clans) living in Tongcheng County, China. For brevity, we will refer to these families as the Tongcheng individuals or clans. There is information on more than 14,000 couples together with their parents and children. While the majority of these marriages took place during the Qing dynasty (1644 – 1911), our sample period spans more than five centuries roughly back to the year 1300. Importantly, while Chinese genealogies are patrilineal and thus cover men in a much more detailed way than women, we observe we observe a measure of the income of the in-law family both for brides and grooms. This allows us to study marriage matching by gender.
very interesting…

The macroeconomic and fiscal impact of population ageing

June 30, 2022

Katalin Bodnár and Carolin Nerlich in this ECB paper:

The euro area, like many other advanced economies, has entered an era of drastic demographic change. Without appropriate policy responses, population ageing in the euro area is posing formidable challenges for potential growth, monetary policy and public finances. This paper examines – from a central bank’s perspective – the macroeconomic and fiscal effects of population ageing in the euro area and looks at
the main challenges ahead in the next decades.

Total population in the euro area is projected to decline as of around 2035, while the old-age dependency ratio will rise strongly in the coming 15 years, putting additional burden on pension systems.

The analysis in the paper finds that the demographic changes in the euro area present a drag on potential growth, mainly through labour supply and productivity growth – similarly to developments in Japan, which is ahead of the euro area in terms of population ageing. Precautionary savings may be higher, and the natural rate of interest lower, while the effect on trend inflation and wages are not obvious. 

Population ageing is posing a burden on fiscal policy, through upward pressure on pension spending and adversely affecting the tax bases and the structure of public revenues.

Thus, it poses significant challenges for fiscal sustainability, limits fiscal policy space and effectiveness. To safeguard against the adverse economic and fiscal consequences of population ageing, there is a need for fiscal buffers, improved quality
of public finance and structural reforms.

Ageing and demographics is a very important area of research and action. Very little attention is paid to it..

Analysing the Financial Portfolio of Indian Households Following Different Faiths

July 16, 2021

Rakshith Ponnathpur of Dvara Research in this blogpost:

Social norms and religious beliefs have an influence on all aspects of our lives, financial behaviour notwithstanding. This can lead to significant differences in the financial well-being of different communities: religious, regional, ethnic, racial, caste, cultural, etc. In addition to these endogenous factors, other exogenous factors such as the social, cultural, economic, and political capital held by the communities also contribute to these differences. While discussing the factors responsible for such differences observed is beyond the scope of our work, there is merit in checking whether and where these differences exist and to what extent, so that it can better inform such conversations.

In this post, we carry out such an exercise by analysing the financial portfolios of Indian households adhering to different religious faiths,[1] using the nationally representative Consumer Pyramids Household Survey (CPHS) data from the Centre for Monitoring Indian Economy (CMIE). We use their income, expenditure, assets, liabilities and demographic data from the ‘August to December 2020’ wave to build a financial profile of households belonging to different faiths and analyse the differences between them.


Overall, we find that Jain and Sikh households are significantly better off than the national average in terms of their income and educational levels, as well as their financial portfolios. Christian households perform above average in terms of income and education, but around the average in terms of their financial portfolios. Muslim households are characterised by below-average income and education levels, and participation across all asset classes. All characteristics of Hindu households hover around the national average, owing to their large share in the population as well as their over-representation in the dataset.

Much more in the post and these slides.

Macron Commission on challenges facing French economy

July 9, 2021

French President Emmanuel Macron set up a commission under Jean Tirole and Olivier Blanchard to study economic challenges facing France. The Commission submitted its report:

Responding to the global challenges facing our societies requires new analytical frameworks and the emergence of new ideas, especially in the aftermath of the global health crisis. The President of the Republic asked Olivier Blanchard, Professor Emeritus at MIT, and Jean Tirole, Honorary President of the Toulouse School of Economics, to chair a commission of renowned international experts, supported by France Stratégie.

The committee focused on three long-term structural challenges: climate change, economic inequality and demographic change. Their work led to the production of a detailed report on these three challenges.

Climate change: time to act

The work of the IPCC has highlighted the role of human activities in climate change and the importance of acting now to limit the rise in temperatures to less than 2°C compared to the pre-industrial era. With this objective in mind, and following the signing of the Paris Agreement in 2015, France has set itself the objective of being carbon neutral by 2050. By committing today to ambitious policies and setting clear and credible milestones, France and Europe can play a leading role in international climate action. The commission, led by Mar Reguant, Associate Professor of Economics at Northwestern University, Illinois, and Christian Gollier, Professor and Director General of the Toulouse School of Economics (TSE), presented an analytical framework and proposals to accelerate the achievement of these goals.

Economic inequality and insecurity: measures for an inclusive economy

Equal opportunities, social protection, fair and efficient tax and social redistribution… Even if France is in a better position than most other countries, in order to ensure that economic opportunities benefit as many people as possible and are fairly distributed, France must act on several fronts and at different stages of people’s economic lives. The commission, led by Stefanie Stantcheva, Professor of Economics at Harvard University, and Dani Rodrik, Professor of Political Economy at the John F. Kennedy School of Government, Harvard University, makes the case and sets out a framework for good policy.

Facing demographic change: ageing, health and immigration

Ageing implies finding a fair and efficient balance between periods of employment and retirement. To achieve this, it is necessary to modernise the pension system, but also to support older people in their activities. This includes strengthening vocational training and the prevention and treatment of chronic diseases. Axel Börsch-Supan, Director of the Max Planck Institute for Social Law and Social Policy, Munich, Claudia Diehl, Professor at the Munk School of the University of Konstanz, and Carol Propper, Professor of Economics at the Imperial College Business School in London, have examined the facts and their perception before drawing up a series of recommendations.

Interview of the duo.

Dani Rodrik and Stefanie Stantcheva in this Proj Synd article:

Just as the pandemic was gathering pace in early 2020, French President Emmanuel Macron set up an international commission of economists to assess longer-term challenges and make policy proposals. While some of the recommendations are specific to France, many (if not most) are relevant to other advanced economies as well.


Swedish school lunch reform, nutrition, and lifetime income

June 17, 2021

Petter Lundborg and Dan-Olof Rooth in this voxeu research:

The Economic History Podcast

June 11, 2021

Seán Kenny, Postdoctoral fellow at und University Sweden has started a superb podcast on economic history.

The Economic History podcast is a platform for sharing knowledge, ideas and new research with a general interest audience. Each fortnight, we meet leading academics in the field and discuss a range of topics, including pandemics, long run economic growth, gender issues, financial crises, inequality, sustainable development and a number of weird and fun economic experiments in history. There is no time like the past to help us understand the present.

The podcast has featured 24 episodes so far and each one is a gem. It is amazing to grasp and understand economic history via this medium. The subject has many layers which papers, books etc. cannot cover and can be done much better in a conversation format. I think podcasts such as this one by Kenny could be used for teaching economic history.

Labor Migration in Asia: Impacts of the COVID-19 Crisis and the Post-Pandemic Future

April 19, 2021

New ADB report:

This report by the Asian Development Bank Institute (ADBI), the Organisation for Economic Co-operation and Development (OECD), and the International Labour Organization (ILO) analyzes labor migration trends in Asia and puts them in the context of economic and policy developments and the changes wrought by the coronavirus disease (COVID-19) pandemic. It examines the policy settings in the major origin and destination countries of labor migrants and the medium- and long-term factors that will shape the future of labor migration in Asia. It further provides recommendations for building back better in a post-pandemic world.

The report offers up-to-date comparative statistics on labor migration, including evidence of the impacts of COVID-19 on labor migration flows and remittances. Two statistical annexes offer detailed country fact sheets and coverage of intra-Asia and cross-regional migration flows. The report also includes discussions on the future of labor migration in the aftermath of the pandemic and the role of technology and digitalization on labor mobility and its management.

This analysis partly draws on discussions that took place at the 10th ADBI-OECD-ILO Roundtable on Labor Migration: Future of Labor Migration in Asia: Challenges and Opportunities in the Next Decade, held in Bangkok, Thailand in February 2020, an annual event co-organized by ADBI, the OECD, and the ILO that brings together regional experts and policy makers. In response to the COVID-19 pandemic, the publication focuses on the pandemic’s impacts on labor mobility.


Real interest rates and demographic developments across generations: A panel-data analysis over two centuries

April 14, 2021

Lucas Fuhrer and Nils Herger in this Swiss National Bank paper:

This paper empirically examines the effect of population growth on long-term real interest rates. Although this effect is well founded in macroeconomic theory, the corresponding empirical results have been rather tenuous and surprisingly unstable. As the demographic interest rate impact is theoretically based on intergenerational relationships, we not only contemplate gross population growth rates but also distinguish between demographic growth resulting from a birth surplus and net migration.

Within a panel covering 12 countries and the years since 1820, our results suggest that there is a positive, statistically significant, and stable effect from the birth surplus on real interest rates. Conversely, the corresponding effect of net migration seems to be much more volatile. Hence, our results suggest that it is mainly population growth occurring through a birth surplus that affects the equilibrium real interest rate.


How and why have some societies come to control infectious diseases while others have let them fester?

April 9, 2020 sent this message to its subscribers:

The current crisis has brought into focus the tradeoffs between quarantines and economic freedom.  For an excellent book about the history of these tradeoffs in the United States, read Werner Troesken’s The Pox of Liberty:  How the Constitution Left Americans Rich, Free, and Prone to Infection.   Werner traces the history of how governments at all levels of the American federal system dealt with three deadly and recurring diseases:  smallpox, yellow fever, and typhoid.    All of the issues the world is facing today to avoid horrid deaths are discussed in Werner’s book:  inadequate testing, the absence of vaccines, attempts to develop vaccines, tradeoffs between economic losses and quarantines, the uncertainties that the disease might return in the future, and inadequate medical facilities. 

The situations developed in the 19th century societies when there were much higher death rates, lower incomes, and at best rudimentary medical care.  Werner shows how the clauses of the U.S. Constitution that expanded freedoms served to make it more difficult to prevent disease in the short run.  Yet, in the long run these same clauses provided expansive opportunities for a wide range of governments, people, and organizations to increase incomes and find ways to solve the disease problems.  It is a complex story that weaves together law, economics, politics, sociology, demography, and epidemiology into a superb tapestry by one of the leading economic historians of public health.  Sadly, Werner died in 2018, so we cannot talk to him directly, but his writing offers a valuable history lesson for how to think about the issues the world faces today. 


Here is the book. The first chapter of the book is available. has a book review:

Throughout the remainder of the book, Troesken answers this question by appealing to the American system itself. In a single word, the reason the America historically had such a high disease rate: liberty.

The fact the American political system values individual liberty and allows the public to elect officials that share their beliefs, combined with a strong history of individual and states’ rights allowed local preferences and, in some cases, the voices of a few to prevent compulsory vaccination and deter certain public health investments. While this book’s focus is on the eradication of smallpox and typhoid from the late eighteenth to the early twentieth century, its framework is useful in understanding contemporary public health debates and policy.  Recently, scientific evidence has debunked the potential link between autism and vaccination, yet there is still a strong anti-vaccine movement among parents of newborns. Likewise, the HPV vaccine is highly effective in reducing cervical cancer later in life, yet vaccination rates remain relatively low due to a resistance to discussing reproductive health with young daughters. Understanding that the American system empowers these voices should shed light on the persistence of disease in the United States.


After finishing the book, one is left with the following impression: The institutions, which provide individuals the incentives to trade and produce have also hindered higher levels of government from internalizing public health externalities. Thus, the United States has been able to amass significant wealth and income due to individual effort, yet has continued to battle certain diseases longer than other nations with a stronger central government. At the same time, the government’s desire to pay its debts has also facilitated large, long term investments to improve water infrastructure. This nuanced study has helped fill a gap in the existing literature by highlighting that the institutions and disease environment are part of an endogenous relationship between the two.

Does this explain current Covid19 crisis in US which has largest number of cases?



Shrinkonomics: Lessons from Japan

April 9, 2020

Gee Hee Hong and Todd Schneider of IMF in this article:

Demographic change is having a fundamental impact on the global economy—but not in the way we once thought it would.

A mere five decades ago, some observers were predicting that the human population was too big and would soon strip the world of resources, leading to mass starvation, collapse of the global economy, and a host of other ills. But the doomsday scenario of mass overpopulation did not materialize. Rather, for the first time in modern history, the world’s population is expected to virtually stop growing by the end of this century, owing in large part to falling global fertility rates.

Japan’s unique population, fertility, and immigration history make it a leading exemplar of this trend. The impact of an aging and shrinking population is already visible in everything from economic and financial performance to the shape of cities and public policy priorities (such as the long-term solvency of public pension, health care, and long-term care systems).

With demographics having such a clear and accelerating impact, Japan is the test kitchen for “shrinkonomics”—a laboratory from which other countries are beginning to draw lessons.

The IMF’s work on the Japanese economy has focused heavily on demographics in recent years—mirroring the intense debate within Japan on how best to respond to the pressures from a rapidly aging and shrinking population. While each country’s experience will be different—and prompt different solutions—some of the key macroeconomic and financial effects can be identified from Japan’s recent experience.

What makes Japan different?

On the one hand, Japan is in good company with respect to broad demographic trends. Looking across Organisation for Economic Co-operation and Development data, there are many countries with declining populations, and likely more to come. Japan is also not alone—in the region or compared with other advanced economies—with respect to having a low fertility rate, which is common across most of the Group of Seven (G7). Japan also shares with other countries an improvement in health and average lifespan. This is a common trend across most advanced economies, though Japan is certainly doing better than average.

But this is not the whole story. Japan’s unique characteristics put demographic trends (and their macroeconomic and financial impact) in sharper relief than in other countries:

Japan’s postwar baby boom was short —only about three years, compared to other G7 members, where such periods stretched anywhere from nine to twenty years. This means that Japan’s demographic structure will shift dramatically in just a few years—particularly as the boomers hit retirement age and become eligible for public pension and health care benefits.

Japan leads the world in terms of life expectancy —surpassing all Group of Twenty economies as early as 1978. Extended life expectancy, combined with low fertility, accentuates demographic change in Japan and is manifested in a steady increase in the old-age dependency ratio (the number of retired people relative to the working-age population).

Immigration flows are too small to make an impact —on aging and shrinking demographics. In comparison with other G7 economies, Japan is an outlier in terms of its very limited use of imported labor. Foreign workers accounted for only about 2.2 percent of Japan’s total labor force in 2018, compared with an estimated 17.4 percent in the United States and 17 percent in the United Kingdom.

Covid19 is making things even worse for Japan…

Federal Reserve Structure, Economic Ideas, and Monetary and Financial Policy

July 31, 2019

Superb new paper by Michael Bordo and Edward Prescott. They document how Regional Feds have contributed to ideas in US mon policy:

The decentralized structure of the Federal Reserve System is evaluated as a mechanism for generating and processing new ideas on monetary and financial policy. The role of the Reserve Banks starting in the 1960s is emphasized. The introduction of monetarism in the 1960s, rational expectations in the 1970s, credibility in the 1980s, transparency, and other monetary policy ideas by Reserve Banks into the Federal Reserve System is documented.

Contributions by Reserve Banks to policy on bank structure, bank regulation, and lender of last resort are also discussed. We argue that the Reserve Banks were willing to support and develop new ideas due to internal reforms to the FOMC that Chairman William McChesney Martin implemented in the 1950s.

Furthermore, the Reserve Banks were able to succeed at this because of their private-public governance structure, a structure set up in 1913 for a highly decentralized Federal Reserve System, but which survived the centralization of the System in the Banking Act of 1935. We argue that this role of the Reserve Banks is an important benefit of the Federal Reserve’s decentralized structure and contributes to better policy by allowing for more competition in ideas and reducing groupthink.

I actually think you see far better research in regional Feds than Washington Fed…

Joblessness: The great Global crisis of the twenty-first century

June 28, 2017

Edward Galesar of Harvard University writes a long essay covering history, society, politics and economics. The kind of essay which was basically how economists wrote and tried communicating with the public. This art is mostly lost now as much of economic thinking has become garbled amidst equations and race for publishing.

He takes you through a tour on how the jobless problem in America started. He focuses on America joblessness is a global problem:


Why are some immigrant groups more successful than others?

June 27, 2017

Prof Edward Glaesar’s new paper says the differences are largely due to number of immigrants and population of home country:


Chameleons: The misuse of theoretical models in finance and economics

September 23, 2016

Well Paul Romer’s paper scathing state of macro has been much talked about. Romer even defended the paper.

However, there are others as well who have been questioning state of economics who are not as well known. Here is a 2014 paper by Paul Pfleiderer of Stanford (what is it with Profs named Paul!?) who says we have a new problem. There are certain models which are full of assumptions yet are played at a policy/real world level. These models obviously don’s meet the filter of real world once assumptions are done away with. Still they remain the main ideas.

He calls such models as chameleons:


Chile’s Pension System: Once eulogised and a case for emulation is now under a crisis…

September 8, 2016

These stories are so common in economics. The moment you think certain economic policy or system or economy has become the gold standard, it just goes the other way. This is both beauty and frustrating part of the subject.

This is the case with Chilean pension system as well. It was once eulogised but is under a crisis. It moved to a defined contribution plan much earlier than other economies which continue to be burdened by defined benefit plans.

But it is these very DC plans which are biting now. Reasons are not political but labor markets, as Prof. Andrés Velasco suggests:

Defined-benefit pension plans are under pressure. Changing demographics spell trouble for so-called pay-as-you-go (PAYG) systems, in which contributions from current workers finance pensions. And record-low interest rates are putting pressure on funded systems, in which the return from earlier investments pays for retirement benefits. TheFinancial Times recently called this pensions crunch a “creeping social and political crisis.”

Defined-contribution, fully-funded systems are often lauded as the feasible alternative. Chile, which since 1981 has required citizens to save for retirement in individual accounts, managed by private administrators, is supposed to be the poster child in this regard. Yet hundreds of thousands of Chileans have taken to the streets to protest against low pensions. (The average monthly benefit paid by Chile’s private system is around $300, less than Chile’s minimum wage.)

Chile’s government, feeling the heat, has vowed to change the system that countries like Peru, Colombia, and Mexico have imitated, and that George W. Bush once described as a “great example” for Social Security reform in the United States. What is going on?

The blame lies partially with the labor market. Chile’s is more formal than that of its neighbors, but many people – especially women and the young – either have no job or work without a contract. High job rotation makes it difficult to contribute regularly. And it has proven difficult to enforce regulations requiring self-employed workers to put money aside in their own accounts.

Moreover, the legally mandated savings rate is only 10% of the monthly wage, and men and women can retire at 65 and 60, respectively – figures that are much lower than the OECD average. The result is that Chileans save too little for retirement. No wonder pensions are low.

But that is not the end of the story. Some of the same problems plaguing defined-benefit systems are also troubling defined-contribution, private-account systems like Chile’s. Take changes in life expectancy. A woman retiring at age 60 today can expect to reach 90. So a fund accumulated over 15 years of contributions (the average for Chilean women) must finance pensions for an expected 30 years. That combination could yield decent pensions only if the returns on savings were astronomical.

They are not. On the contrary, since the 2008-2009 global financial crisis, interest rates have been collapsing worldwide. Chile is no exception. This affects all funded pension systems, regardless of whether they are defined-benefit or defined-contribution schemes.

We just keep going in circles.

The crucial lesson is both policy pushers and public should take policies with a pinch of salt. The unintended or hidden consequences eventually take-over and the initial successes become cases for future problems..

How quickly did 30 million migrants to the US assimilate culturally?

July 7, 2016

Immigrants are the easiest targets in any political campaign. Most leaders use this to come to limelight.

But what about immigrants themselves? Do they assimilate in the different culture or maintain their own identity? If they maintain their own, then obviously they invite even more attacks.

Ran Abramitzky and Leah Boustan try and understand this question of cultural assimilation. They look at mass migration of 30 million Europeans to US during 1850-1913.


Russia’s demographic puzzle – falling birth rates and rising death rates…

March 8, 2016

A note by Guillaume Vandenbroucke on Russia;’s demographic profile. 

Russia is one of those countries whose death rates has been rising for quite some time now:


‘Children of the Wall’: Outcomes for kids born in a crisis

November 11, 2014

Timely piece by Arnaud Chevalier and Olivier Marie. Anything on Berlin Wall is likely to be read at this hour.

In this article, authirs show how children born during the fall are facing several issues:

Children born in crises face different initial conditions. Data on children born in East Germany just after the Berlin Wall came down confirms that this corresponds to worse adult outcomes. ‘Children of the Wall’ have 40% higher arrest rates, are 33% more likely to have repeated a grade by age 12, and are 9% more likely to have been put into a lower educational track. This column argues that these negative outcomes can be explained by the lower average parenting skills of those who decided to have children during a period of high economic uncertainty.

The authors get hold of a survey to tease these relationships:

To explore if these negative outcomes are driven by negative parental characteristics, we make use of very detailed survey data from the German Socio Economic Panel (SOEP) and the Deutsches JungedInstitut survey (DJI). Women who gave birth in East Germany just after the end of the communist regime were on average younger, less educated, less likely to be in a relationship, and less economically active.

Importantly, they also provided less educational input to their children even if they were not poorer. The Children of the Wall also rated their relationships with their mothers and the quality of parental support they received by age 17 much less favourably than their peers. Both these children and their mothers were also far more risky individuals compared with individuals who did not give birth (or were not born) in East Germany between August 1990 and December 1993.

While these results are in line with negative parental selection, they could also be driven by timing-of-birth effects. Due to the economic turmoil prevalent at the time, these children may have experienced higher levels of maternal stress in utero and during early childhood, which may have shaped their future behaviour.

To assess this hypothesis, we examine the same set of outcomes for the older siblings of the Children of the Wall who were born in the non-uncertain times of East German communism. They also similarly report having a poor relationship with their mothers, lower educational attainment, and are more risk-taking individuals. We thus reject the possibility that the Children of the Wall have worse outcomes due to being born in ‘bad times’ and instead conclude that the negative outcomes observed for this cohort can be explained by the lower average parenting skills of those who decided to have children during a period of high economic uncertainty.

A possible reason for this negative parental selection is that the fertility decision of these women did not react as strongly to changes in the economic environment. Indeed, further analysis of the SOEP reveals that less educated mothers were far less likely than more educated ones to reduce their fertility when they perceived a bad economic environment.

🙂 Importance of parenting..

On a demographic consequence of the First World War

August 24, 2012

Super column by Guillaume Vandenbroucke. It is connected to the work on linking institutions with supply of labor by Elena Nikolova . In that work, Nikolova  showed inclusive instis are more likely to emerge when we have shortage of labour. One of the example was world wars where economies like US allowed voting for women to incentivise women as supply of men has decreased post World Wars.

This column by Vandenbroucke goes a step back and shows how labor force has declined post WWI. This was because of decline in fertility. The fertility in turn declines because of expectations over loss in income and productivity. He actually makes a model factoring these expectations and shows it resembles the actual trend fairly closely.


Demographic Changes and Macroeconomic Performance: Japanese Experiences

June 1, 2012

Bank of Japan officials have been strongly emphasizing on the role of demographics in Japanese economy and recovery from the crisis. As per them, ageing Japanese population played a string role in slow recovery from the 1990s crisis. And many developed econs are in a similar Japanese position — Ageing population and deep financial crisis. hence, their recovery paths could also be slow and tardy like Japs.

This blog has continuously covered papers/speeches on demographic issues. I also wrote a paper on the topic.

BoJ goes a step further and has organised a conference on the topic. Its annual IMES conference is based on the demographic theme and its impact on macroeconomics. The papers are not still online so one has to wait.

The inaugural speech by BoJ Governor, Shirakawa is on the website. As always very interesting and more detailed than previous speeches on the topic.


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