Demographics, Wealth, and Global Imbalances in the Twenty-First Century
We use a sufficient statistic approach to quantify the general equilibrium effects脗 of population aging on wealth accumulation, expected asset returns, and global imbalances.脗 Combining population forecasts with household survey data from 25 countries,脗 we measure the compositional effect of aging: how a changing age distribution脗 affects wealth-to-GDP, holding the age profiles of assets and labor income fixed. In脗 a baseline overlapping generations model this statistic, in conjunction with crosssectional脗 information and two standard macro parameters, pins down general equilibrium脗 outcomes. Since the compositional effect is positive, large, and heterogeneous脗 across countries, our model predicts that population aging will increase wealth-to-GDP ratios, lower asset returns, and widen global imbalances through the twenty-first脗 century. These conclusions extend to a richer model in which bequests, individual脗 savings, and the tax-and-transfer system all respond to demographic change.