Demography and Retirement: The Twenty-First Century

By Anna M. Rappaport; Sylvester J. Schieber | Go to book overview

5
The Impact of the Demographic Transition on Capital Formation

Alan J. Auerbach and Laurence J. Kotlikoff


INTRODUCTION

The population of the United States is aging. As of 1990, about one fifth of the total U.S. population was over 55 years old. 1 In fifty years that figure will be close to one third. This aging will be particularly acute among the older old. Currently, those over age 75 represent only 5 percent of Americans. By 2040 this figure this projected to grow to about 12 percent.

At the same time that the elderly fraction of the population is increasing, the relative population of young people will be declining. While well over half the population was under age 35 in 1990, this figure is projected drop to just over 40 percent by the year 2040.

This aging of the population, which is attributable to declining rates of fertility and mortality, has a range of implications for the level and composition of national saving and capital formation in the United States over the next several decades. In this paper, we review a variety of these implications and discuss the policy issues that they raise.

In considering these issues, we will focus primarily on the United States. However, one should keep in mind that many other countries are simultaneously undergoing demographic transitions as strong or stronger than the United States. In Japan, for example, the demographic transition is occurring at a more rapid pace. Almost a quarter of the Japanese population is currently 55 or older; by 2010 almost a third of the Japanese population will be 55 or older compared with only a quarter of the U.S. population. The existence of such a demographic transition in many of the industrialized countries means not only that the lessons leaned for the United States may apply much more broadly, but also that the pattern of international capital flows that one might associate with a single

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Demography and Retirement: The Twenty-First Century
Table of contents

Table of contents

  • Title Page iii
  • MEMBERS OF THE PENSION RESEARCH COUNCIL v
  • Purpose of the Council vii
  • Contents ix
  • 1: Overview 1
  • Introduction 1
  • 2: Demographic Change in the United States, 1970-2050 19
  • ENDNOTES 47
  • Stephen C. Goss 53
  • Barry Edmonston 57
  • Introduction 57
  • 3: Expected Changes in the Workforce and Implications for Labor Markets 73
  • Introduction 73
  • Joseph F. Quinn 105
  • 4: Can Our Social Insurance Systems Survive the Demographic Shifts of the Twenty-First Century? 111
  • Introduction 112
  • ENDNOTES 148
  • 5: The Impact of the Demographic Transition on Capital Formation 163
  • Introduction 163
  • ENDNOTES 180
  • Alicia H. Munnell 183
  • 6: Implications of Demographic Change for Design of Retirement Programs 189
  • 7: Trends in Health Among the American Population 225
  • Introduction 225
  • ENDNOTES 242
  • Discussions 243
  • 8: Population Aging and Retirement Policy: An International Perspective 255
  • Introduction 255
  • ENDNOTES 284
  • Robert J. Myers 293
  • Bibliography 297
  • Index 315
  • Contributors 323
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