Volume 30 - Article 34 | Pages 963–1010  

Economic support ratios and the demographic dividend in Europe

By Alexia Prskawetz, Jože Sambt

Abstract

Background: Support ratios and dependency ratios are widely used as indicators for measuring the effects of population ageing on economic development. Both of these indicators use fixed age limits to distinguish between the working and the dependent populations.

Objective: We apply age-specific profiles of consumption and labour income instead of using arbitrary age limits. Based on these age-specific characteristics, we study the impact of changes in the age structure on the economy. In addition to looking at the compositional effect of age structure changes, we also consider savings/wealth effects.

Methods: The National Transfer Accounts (NTA) offer researchers a new method for comprehensively analysing economic flows across age groups. Because they combine micro (survey) data and macro controls, the NTA provide detailed profiles of consumption and labour income by age, as well as age profiles of transfers and assets, through which the differences between consumption and labour income are covered.

Results: The development of the "NTA support ratio" for 2010-2050 indicates that the compositional effect of the changing population structure on economic development will range from -11% for the UK to -25% for Slovenia, which exceed the values of the conventional support ratio. The positive saving/wealth effect is almost negligible for the countries studied, except for the UK, Germany, and Spain.

Conclusions: Given the current profiles of consumption and labour income in the European NTA countries, the rates of growth in the support ratio induced by the changing demographic structure will be negative in these countries. A positive effect of increased saving/wealth can counteract this decline in the support ratio, but depends on the institutional settings in which the elderly finance their consumption.

Comments: We offer for the first time a European comparative study on the effect of changes in the age structure in the economy based on NTA data.

Author's Affiliation

• Alexia Prskawetz - Wittgenstein Centre for Demography and Global Human Capital (IIASA, OeAW, University of Vienna), Austria EMAIL
• Jože Sambt - Univerza v Ljubljani, Slovenia EMAIL

Other articles by the same author/authors in Demographic Research

How many old people have ever lived?
Volume 36 - Article 54

Changes in economic activity: The role of age and education
Volume 36 - Article 40

Family policies in the context of low fertility and social structure
Volume 29 - Article 37

The reproductive value as part of the shadow price of population
Volume 24 - Article 28

Does fertility decrease household consumption?: An analysis of poverty dynamics and fertility in Indonesia
Volume 20 - Article 26

Austria: Persistent low fertility since the mid-1980s
Volume 19 - Article 12

The "Wedding-Ring": An agent-based marriage model based on social interaction
Volume 17 - Article 3

Decomposing the change in labour force indicators over time
Volume 13 - Article 7

Pathways to stepfamily formation in Europe: Results from the FFS
Volume 8 - Article 5

Fertility in second unions in Austria: Findings from the Austrian FFS
Volume 3 - Article 2

Most recent similar articles in Demographic Research

Is single parenthood increasingly an experience of less-educated mothers? A European comparison over five decades
Volume 51 - Article 34    | Keywords: age, children, cross-national comparison, education, Europe, family life course, inequality, single motherhood

The transition to adulthood in Europe at the intersection of gender and parental socioeconomic status
Volume 51 - Article 23    | Keywords: Europe, Europe, event history, event history, gender, multilevel analysis, parental socio-economic status, stratification, transition to adulthood

A multidimensional global migration model for use in cohort-component population projections
Volume 51 - Article 11    | Keywords: age dependency, education, international migration, migration, modelling, population projection, projections

The intergenerational transmission of migration capital: The role of family migration history and lived migration experiences
Volume 50 - Article 29    | Keywords: childhood, emigration, Europe, immigration, life course

Measuring the educational gradient of period fertility in 28 European countries: A new approach based on parity-specific fertility estimates
Volume 49 - Article 34    | Keywords: education, Europe, period fertility, quantum, tempo, total fertility rate (TFR)