The welfare state and demographic dividends

BACKGROUND The demographic transition experienced by developed countries produces initial positive effects on economic growth - the first demographic dividend - which can be extended into a second demographic dividend if baby boomers' savings increase capital accumulation. Nevertheless, aging m...

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Authors: Abío, Gemma|||0000-0003-4823-524X, Patxot, Concepció|||0000-0002-4382-0119, Sánchez-Romero, Miguel, Souto Nieves, Guadalupe|||0000-0002-8056-9330
Format: article
Publication Date:2017
Country:España
Institution:Universitat Autònoma de Barcelona
Repository:Dipòsit Digital de Documents de la UAB
Language:English
OAI Identifier:oai:ddd.uab.cat:214557
Online Access:https://ddd.uab.cat/record/214557
https://dx.doi.org/urn:doi:10.4054/DemRes.2017.36.48
Access Level:Open access
Keyword:Aging
Demographic dividend
Intergenerational transfers
National transfer accounts (NTA)
Overlapping generations models
Spain
Sweden
United States
Welfare state
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spelling The welfare state and demographic dividendsAbío, Gemma|||0000-0003-4823-524XPatxot, Concepció|||0000-0002-4382-0119Sánchez-Romero, MiguelSouto Nieves, Guadalupe|||0000-0002-8056-9330AgingDemographic dividendIntergenerational transfersNational transfer accounts (NTA)Overlapping generations modelsSpainSwedenUnited StatesWelfare stateBACKGROUND The demographic transition experienced by developed countries produces initial positive effects on economic growth - the first demographic dividend - which can be extended into a second demographic dividend if baby boomers' savings increase capital accumulation. Nevertheless, aging might reverse this process if dissaving of elderly baby boomers and the pressure on the pay-as-you-go financed welfare state reduce savings and capital. OBJECTIVE The aim of this paper is to evaluate the extent to which demographic dividends in Spain provide an opportunity for the reform of the welfare state system for an aging population. METHODS We decompose demographic dividends using a general equilibrium overlapping generations model with realistic demography and public transfers from the National Transfer Accounts database. This allows us to capture the endogenous evolution of savings and capital accumulation and, hence, the second demographic dividend. RESULTS When baby boomers enter the labor market, the purely demographic support ratio increases and this positive effect is extended by composition changes in the age structure of workers. When they start saving, the second demographic dividend arises, while its total net effect depends both on the strength of the aging process and on transfer size. CONCLUSIONS The derived decomposition shows that the second demographic dividend might also disappear. Sharp population aging in Spain implies that capital will shrink drastically after 2040. Before this, there seems to be margin for reforms; however, an extension of the welfare state toward the Nordic model would considerably reduce capital. CONTRIBUTIONS This paper contributes to the debate on the effects of demographics on economic growth by decomposing demographic dividends and investigating the impact of different welfare state transfer systems on the second demographic dividend. 22017-01-0120172017-01-01Articlehttp://purl.org/coar/resource_type/c_6501VoRhttp://purl.org/coar/version/c_970fb48d4fbd8a85info:eu-repo/semantics/articleapplication/pdfhttps://ddd.uab.cat/record/214557https://dx.doi.org/urn:doi:10.4054/DemRes.2017.36.48reponame:Dipòsit Digital de Documents de la UABinstname:Universitat Autònoma de BarcelonaInglésengopen accesshttp://purl.org/coar/access_right/c_abf2Aquest document està subjecte a una llicència d'ús Creative Commons. Es permet la reproducció total o parcial, la distribució, la comunicació pública de l'obra i la creació d'obres derivades, sempre que no sigui amb finalitats comercials, i sempre que es reconegui l'autoria de l'obra original.https://creativecommons.org/licenses/by-nc/4.0/info:eu-repo/semantics/openAccessoai:ddd.uab.cat:2145572026-06-06T12:50:31Z
dc.title.none.fl_str_mv The welfare state and demographic dividends
title The welfare state and demographic dividends
spellingShingle The welfare state and demographic dividends
Abío, Gemma|||0000-0003-4823-524X
Aging
Demographic dividend
Intergenerational transfers
National transfer accounts (NTA)
Overlapping generations models
Spain
Sweden
United States
Welfare state
title_short The welfare state and demographic dividends
title_full The welfare state and demographic dividends
title_fullStr The welfare state and demographic dividends
title_full_unstemmed The welfare state and demographic dividends
title_sort The welfare state and demographic dividends
dc.creator.none.fl_str_mv Abío, Gemma|||0000-0003-4823-524X
Patxot, Concepció|||0000-0002-4382-0119
Sánchez-Romero, Miguel
Souto Nieves, Guadalupe|||0000-0002-8056-9330
author Abío, Gemma|||0000-0003-4823-524X
author_facet Abío, Gemma|||0000-0003-4823-524X
Patxot, Concepció|||0000-0002-4382-0119
Sánchez-Romero, Miguel
Souto Nieves, Guadalupe|||0000-0002-8056-9330
author_role author
author2 Patxot, Concepció|||0000-0002-4382-0119
Sánchez-Romero, Miguel
Souto Nieves, Guadalupe|||0000-0002-8056-9330
author2_role author
author
author
dc.subject.none.fl_str_mv Aging
Demographic dividend
Intergenerational transfers
National transfer accounts (NTA)
Overlapping generations models
Spain
Sweden
United States
Welfare state
topic Aging
Demographic dividend
Intergenerational transfers
National transfer accounts (NTA)
Overlapping generations models
Spain
Sweden
United States
Welfare state
description BACKGROUND The demographic transition experienced by developed countries produces initial positive effects on economic growth - the first demographic dividend - which can be extended into a second demographic dividend if baby boomers' savings increase capital accumulation. Nevertheless, aging might reverse this process if dissaving of elderly baby boomers and the pressure on the pay-as-you-go financed welfare state reduce savings and capital. OBJECTIVE The aim of this paper is to evaluate the extent to which demographic dividends in Spain provide an opportunity for the reform of the welfare state system for an aging population. METHODS We decompose demographic dividends using a general equilibrium overlapping generations model with realistic demography and public transfers from the National Transfer Accounts database. This allows us to capture the endogenous evolution of savings and capital accumulation and, hence, the second demographic dividend. RESULTS When baby boomers enter the labor market, the purely demographic support ratio increases and this positive effect is extended by composition changes in the age structure of workers. When they start saving, the second demographic dividend arises, while its total net effect depends both on the strength of the aging process and on transfer size. CONCLUSIONS The derived decomposition shows that the second demographic dividend might also disappear. Sharp population aging in Spain implies that capital will shrink drastically after 2040. Before this, there seems to be margin for reforms; however, an extension of the welfare state toward the Nordic model would considerably reduce capital. CONTRIBUTIONS This paper contributes to the debate on the effects of demographics on economic growth by decomposing demographic dividends and investigating the impact of different welfare state transfer systems on the second demographic dividend.
publishDate 2017
dc.date.none.fl_str_mv 2
2017-01-01
2017
2017-01-01
dc.type.none.fl_str_mv Article
http://purl.org/coar/resource_type/c_6501
VoR
http://purl.org/coar/version/c_970fb48d4fbd8a85
dc.type.openaire.fl_str_mv info:eu-repo/semantics/article
format article
dc.identifier.none.fl_str_mv https://ddd.uab.cat/record/214557
https://dx.doi.org/urn:doi:10.4054/DemRes.2017.36.48
url https://ddd.uab.cat/record/214557
https://dx.doi.org/urn:doi:10.4054/DemRes.2017.36.48
dc.language.none.fl_str_mv Inglés
eng
language_invalid_str_mv Inglés
language eng
dc.rights.none.fl_str_mv open access
http://purl.org/coar/access_right/c_abf2
https://creativecommons.org/licenses/by-nc/4.0/
dc.rights.openaire.fl_str_mv info:eu-repo/semantics/openAccess
rights_invalid_str_mv open access
http://purl.org/coar/access_right/c_abf2
https://creativecommons.org/licenses/by-nc/4.0/
eu_rights_str_mv openAccess
dc.format.none.fl_str_mv application/pdf
dc.source.none.fl_str_mv reponame:Dipòsit Digital de Documents de la UAB
instname:Universitat Autònoma de Barcelona
instname_str Universitat Autònoma de Barcelona
reponame_str Dipòsit Digital de Documents de la UAB
collection Dipòsit Digital de Documents de la UAB
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repository.mail.fl_str_mv
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