The Implications of the New Demographic Transition

Karen Eggleston, Asia Health Policy Program Director, Shorenstein APARC,Stanford University
Victor Fuchs, Henry J. Kaiser, Jr., Professor of Economics and of Health Research and Policy, Emeritus, Stanford University

Center for Health Policy Research in Progress Seminar Series

Please note: All research in progress seminars are off-the-record. Any information about methodology and/or results are embargoed until publication.

The two most important, quantifiable, universally desired features of the modern era are an increase in life expectancy and growth of per capita gross domestic product.  These twin symbols of socioeconomic development have long enjoyed a synergistic relationship.  However, under current institutions, the favorable effect of rising life expectancy on the supply of productive labor appears to be coming to an end.  The clearest indicator of this new demographic transition is the increase in the share of increases in life expectancy that are realized after age 65.  That share was only about 20 percent at the beginning of the 20th century for the US and 16 other "developed" countries, but it was close to 80 percent by the dawn of the 21st century, and is almost certainly approaching 100 percent asymptotically. We also calculate expected labor force participation for birth cohorts in the US since 1900, compare it with each cohort’s life expectancy, and decompose the change into the effects of demographic change on the expected age distribution of each cohort and the effect of changes over time in age-sex specific labor force participation rates.  We underscore the formidable challenge that success regarding longevity has created for existing social and economic institutions.  If the first demographic transition gave society a "demographic dividend" with only a minimally receptive macroeconomic policy environment, during the new demographic transition far more difficult and innovative policies are needed if societies wish to preserve a positive relationship running from increasing longevity to greater prosperity.

Wednesday, October 05, 2011 | 1:30 pm — 3:00 pm
Encina Commons 117

Asia Health Policy Program, Shorenstein APARC
Freeman-Spogli Institute (FSI)