Demographic Obstacles to European Growth

45 Pages Posted: 25 Apr 2019 Last revised: 16 Dec 2020

See all articles by Thomas F. Cooley

Thomas F. Cooley

New York University - Leonard N. Stern School of Business; National Bureau of Economic Research (NBER)

Espen Henriksen

Department of Financial Economics, BI Norwegian Business School

Charlie Nusbaum

University of California, Santa Barbara (UCSB) - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: December 9, 2020

Abstract

Since the early 1990's the growth rates of the four largest European economies — France, Germany, Italy, and the United Kingdom — have slowed. This persistent slowdown suggests a low-frequency structural change is at work. A combination of longer individual life expectancy and declining fertility have led to gradually ageing populations. Demographic change affects economic growth directly through aggregate savings and labor supply decisions and also indirectly through the pension systems and the need to fund them. Taxes to fund pension systems may impose additional distortions to individual factor-supply choices. We quantify the growth effects from ageing and from the financing of public pensions, and we study the welfare consequences of some reforms that have been suggested to increase late-life labor supply, and through that, long-run growth.

Keywords: economic growth, life-cycle labor supply and savings, ageing, mortality, fertility

JEL Classification: F21, J21

Suggested Citation

Cooley, Thomas F. and Henriksen, Espen and Nusbaum, Charlie, Demographic Obstacles to European Growth (December 9, 2020). NYU Stern School of Business, Available at SSRN: https://ssrn.com/abstract=3356824 or http://dx.doi.org/10.2139/ssrn.3356824

Thomas F. Cooley

New York University - Leonard N. Stern School of Business ( email )

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National Bureau of Economic Research (NBER)

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Espen Henriksen (Contact Author)

Department of Financial Economics, BI Norwegian Business School ( email )

Nydalsveien 37
Oslo, 0442
Norway

Charlie Nusbaum

University of California, Santa Barbara (UCSB) - Department of Economics ( email )

Santa Barbara, CA

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