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Macroeconomic and policy implications of population aging in Brazil

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  • Jorgensen, Ole Hagen
Abstract
This 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.

Suggested Citation

  • Jorgensen, Ole Hagen, 2011. "Macroeconomic and policy implications of population aging in Brazil," Policy Research Working Paper Series 5519, The World Bank.
    • Handle: RePEc:wbk:wbrwps:5519
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    References listed on IDEAS

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    Cited by:

    1. Jorgensen, Ole Hagen, 2013. "Efficiency and equity implications of oil windfalls in Brazil," Policy Research Working Paper Series 6597, The World Bank.
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    3. David Canning & Sangeeta Raja & Abdo S. Yazbeck, 2015. "Africa's Demographic Transition [La transition démographique de l’Afrique]," World Bank Publications - Books, The World Bank Group, number 22036.

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    Keywords

    Emerging Markets; Access to Finance; Population Policies; Economic Theory&Research; Debt Markets;
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