Jorgensen, Ole Hagen2012-03-192012-03-192011-01-01https://hdl.handle.net/10986/3292This paper analyzes the macroeconomic implications of population aging in Brazil. Three alternative yet complementary methodologies are adopted, and depending on policy responses to the fiscal implications of aging, there are two main findings: First, saving rates could increase and not necessarily fall as a consequence of aging in Brazil -- thus contradicting conventional views. Second, lifetime wealth across generations could increase -- as capital deepening generates a second demographic dividend. Two policy responses to aging are emphasized: First, a structural policy response of linking mandatory retirement (or entitlement) ages to increasing life expectancy would boost labor supply and reduce the fiscal costs of aging. Second, in terms of preferable parametric policy responses, the second demographic dividend will be promoted to the highest extent by keeping taxes and debt unchanged while allowing public pensions to adjust downward. Such a policy response would keep pensions from further crowding out private saving -- thus balancing capital accumulation with intergenerational income distribution. In conclusion, Brazil will not necessarily experience a fall in saving and growth, but if government policies are appropriately, adequately, and timely formulated, population aging is likely to lead to substantial capital deepening and increases in lifetime income, wealth, and welfare.CC BY 3.0 IGOACCOUNTINGAGE MORTALITYAGGREGATE DEBTAGING COUNTRIESALTERNATIVE FINANCINGAMORTIZATIONBASE YEARBEQUESTBEQUESTSBORROWINGBUDGET CONSTRAINTCAPITAL ACCOUNTCAPITAL ACCUMULATIONCAPITAL FORMATIONCAPITAL INVESTMENTSCAPITAL MARKETCAPITAL SAVINGSCAPITAL STOCKCHILD MORTALITYCHILD SURVIVALCLOSED ECONOMYCOMMODITYCOMPETITIVENESSCREDIT FLOWSCURRENT ACCOUNTCURRENT ACCOUNT DEFICITDEBTDEBT BURDENDEBT FINANCINGDEBT RATIODEBT SERVICEDECLINE IN FERTILITYDEMOGRAPHICDEMOGRAPHIC CHANGEDEMOGRAPHIC CHANGESDEMOGRAPHIC FACTORSDEMOGRAPHIC TRANSITIONDEPENDENCY RATIODEPENDENCY RATIOSDEVELOPING COUNTRIESDEVELOPING COUNTRYDEVELOPMENT POLICYDISCOUNT RATEDISTRIBUTION OF INCOMEDIVIDENDDIVIDENDSDOMESTIC BORROWINGDOMESTIC CREDITDOMESTIC DEBTEARNINGSECONOMETRIC ANALYSISECONOMIC AGENTSECONOMIC DEVELOPMENTSECONOMIC GROWTHECONOMIC IMPLICATIONSECONOMIC MODELSECONOMIC OUTCOMESECONOMIC POLICYECONOMIC PROJECTIONSEDUCATION SYSTEMSEFFECTS OF POPULATIONELASTICITYELDERLYELDERLY PEOPLEEMPLOYERSEQUILIBRIUMEXCLUSIONEXPENDITUREEXPENDITURESFACTORS OF PRODUCTIONFAMILIESFERTILITYFERTILITY RATESFEWER PEOPLEFINANCESFINANCIAL BURDENFINANCIAL DEPTHFINANCIAL MARKETFINANCIAL MARKETSFINANCIAL SECTORFISCAL BURDENFISCAL POLICYFUTURE GENERATIONSFUTURE RESEARCHGDPGDP PER CAPITAGENERAL EQUILIBRIUM ANALYSISGOVERNMENT BONDSGOVERNMENT BUDGETGOVERNMENT DEBTGOVERNMENT FINANCESGOVERNMENT FINANCINGGOVERNMENT POLICIESGOVERNMENT POLICYGOVERNMENT PROGRAMSGROWTH RATEGROWTH THEORYHEALTH CAREHEALTH SYSTEMHOUSEHOLD LEVELHOUSEHOLD SAVINGHOUSEHOLD SAVING RATEHOUSEHOLD SAVING RATESHOUSEHOLD SURVEYSHOUSEHOLDSHUMAN CAPITALIMMIGRATIONIMPROVEMENTS IN CHILD SURVIVALINCOMEINCOME GROUPINCOME GROUPSINCOME GROWTHINCOME INEQUALITYINCOME LEVELSINCOMESINDEXATIONINEQUALITYINFLATIONINFLATION RATEINFORMAL CREDITINTEREST PAYMENTSINTEREST RATEINTEREST RATESINTERNATIONAL BANKINVESTMENT RATELABOR FORCELABOR FORCE PARTICIPATIONLABOR SUPPLYLIFE EXPECTANCYLONGER LIFELOWER FERTILITYM2MACROECONOMIC VARIABLESMARGINAL PRODUCTSMARKET STRUCTURESMIDDLE-INCOME COUNTRIESMULTIPLIERSNORMAL GOODNUMBER OF HOUSEHOLDSNUMBER OF WORKERSOLD AGEOLD-AGEOLDER AGE GROUPSOPEN ECONOMYOPTIMIZATIONOUTPUTOUTPUT RATIOPARTIAL EQUILIBRIUM ANALYSESPARTIAL EQUILIBRIUM ANALYSISPENSIONPENSION ASSETSPENSION CONTRIBUTIONPENSION CONTRIBUTIONSPENSION REFORMPENSION SYSTEMPENSION SYSTEMSPER CAPITA INCOMEPERFECT COMPETITIONPHYSICAL CAPITALPOLICY DISCUSSIONSPOLICY IMPLICATIONSPOLICY MAKERSPOLICY RESEARCHPOLICY RESEARCH WORKING PAPERPOLICY RESPONSEPOLICY RESPONSESPOLITICAL ECONOMYPOLITICAL STABILITYPOPULATION AGE STRUCTUREPOPULATION CHANGESPOPULATION DIVISIONPOPULATION DYNAMICSPOPULATION GROWTHPOPULATION GROWTH RATEPOPULATION PROJECTIONSPOPULATION STRUCTUREPOSITIVE EFFECTSPRIVATE CREDITPRIVATE INVESTMENTPRIVATE PENSIONPRIVATE PENSIONSPRIVATE SAVINGPRIVATE SAVINGSPRODUCTION FUNCTIONPRODUCTIVITY GROWTHPROGRESSPUBLIC DEBTPUBLIC FINANCEPUBLIC HEALTHPUBLIC PENSIONPUBLIC PENSIONSPUBLIC SAVINGPUBLIC SECTOR DEBTRATE OF RETURNREAL INTERESTREAL INTEREST RATERECEIPTSRELATIONSHIP BETWEEN POPULATIONREPLACEMENT RATEREPLACEMENT RATESRESPECTRETIREMENT AGERETIREMENT AGESRISK OF DEFAULTRISK PREMIUMSAVINGSSAVINGS MECHANISMSAVINGS MOTIVESAVINGS RATESAVINGS RATIOSECURITY ARRANGEMENTSSHARE OF CAPITALSOCIAL PROTECTIONSOCIAL SECURITYSTOCKSSURVIVAL RATETAXTAX RATETAX RATESTRANSITION COUNTRIESTRANSITION ECONOMIESTRANSPARENCYURBANIZATIONWAGE RATESWAGESWEALTHWorld Bank10.1596/1813-9450-5519