The First and Second Demographic Dividend in European NTA Countries
Jože SambtUniversity of Ljubljana, Faculty of Economics
Alexia PrskawetzVienna University of Technology and Vienna Institute of Demography
European NTA Workshop October 2010
Outline
Data and methodology
Population projections (EUROPOP2008) NTA profiles Support ratios and demographic dividends
Results
Support ratios and the first demographic dividend Second demographic dividend
Data and methodology
Population Projections
Latest EUROPOP2008 population projections from Eurostat for the 2008-2060 period, technically extended until the year 2300 (assuming mortality, fertility and migration from 2060)
1-year age groups
Assumptions about Fertility and Mortality in Eurostat’s EUROPOP2008 Population Projections
TFR2008 TFR2060 e0,m,2008 e0,m,2060 e0,f,2008 e0,f,2060
Austria 1.41 1.57 77.4 84.9 82.9 89.2
Finland 1.84 1.84 76.1 84.3 83.0 89.3
France 1.98 1.93 77.5 85.1 84.3 90.1
Germany 1.34 1.53 77.3 84.9 82.6 89.1
Hungary 1.35 1.53 69.7 81.9 78.1 87.3
Slovenia 1.32 1.52 74.7 83.7 81.9 88.8
Spain 1.39 1.56 77.4 84.9 83.9 89.6
Sweden 1.85 1.85 79.0 85.4 83.1 89.3
NTA profiles
NTA age profiles – assuming the shapes don’t change through time
Labor income age profile – labor income per capita relative to the average labor income 30-49 age group
0.0
0.2
0.4
0.6
0.8
1.0
1.2
0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90+
Labo
ur in
com
e p.
c. /
Avg
Lab
. Inc
(30
-49)
Age
Austria (2000)
Germany (2003)
Hungary (2005)
Slovenia (2004)
Spain (2000)
0.0
0.2
0.4
0.6
0.8
1.0
1.2
0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90+
Labo
ur in
com
e p.
c. /
Avg
Lab.
Inc
(30
-49)
Age
Finland (2004)
France (2001)
Sweden (2003)
Consumption age profile – consumption per capita relative to the average labor income 30-49 age group
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90+
Con
sum
ptio
n p.
c. /
Avg
Lab
. Inc
(30
-49)
Age
Austria (2000)
Germany (2003)
Hungary (2005)
Slovenia (2004)
Spain (2000)
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90+
Con
sum
ptio
n p.
c. /
Avg
Lab
. Inc
(30
-49)
Age
Finland (2004)
France (2001)
Sweden (2003)
Lifecycle deficit – life cycle deficit per capita relative to the average labor income in 30-49 age group
-0.8
-0.6
-0.4
-0.2
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90+
Life
cycl
e de
ficit
p.c.
/ A
vg la
b. in
c (3
0-4
9)
Age
Austria (2000)
Germany (2003)
Hungary (2005)
Slovenia (2004)
Spain (2000)
-0.8
-0.6
-0.4
-0.2
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90+
Life
cycl
e de
ficit
p.c.
/ A
vg la
b. in
c (3
0-4
9)
Age
Finland (2004)
France (2001)
Sweden (2003)
Germany: 31 years (age 27 to age 57)
Slovenia: 31 years (age 25 to age 55)
Sweden: 38 years (age 25 to age 62)
Support Ratio
Alternative 1: CON1 = i=1…99 Ni (unweighted)
Alternative 2: CON2 = i=1…99 Si Ni (needs weighted consumption measure)
Alternative 1: LF1 = i=20…64 Ni (unweighted)
Alternative 2: LF2 = i=15…80 w i PR i N i (adjusted for wages and labor force participation rates)
4 combinations: LF1/CON1, LF2/CON1, LF1/CON2, LF2/CON2
S … NTA consumption age profilew PR … NTA labor income age profile
Demographic Dividends
L = LF2N= CON2
First demographic dividend:
Second demographic dividend:
Calculation of the second demographic dividend is based on Lee & Mason NUPRI2006 paper
)t(N)t(L
)t(L)t(Y
)t(Y)t(C
)t(N)t(C
NL
YC
lcc
lcc
)t(N)t(L
)t(Y)t(C
)t(y)t(c
)t(N)t(L
)t(y)t(Y)t(C
)t(c
)t(N)t(L
)t(L)t(Y
)t(Y)t(C
)t(N)t(C
yy
yy
consumption index: “extend to which consumptionper equivalent consumer rises relative to productivity changes induced by technological change”
2nd demographic dividend: rate of growth of consumption relative to labor income
Results
Four alternative measures of support ratios (relative to 2000)
0.700.720.740.760.780.800.820.840.860.880.900.920.940.960.981.001.021.041.061.081.10
1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 2060
Rat
io
Year
LF1/CON1
LF2/CON1
LF1/CON2
LF2/CON2
Austria Finland
France Germany
Four alternative measures of support ratios (relative to 2000)
Hungary Slovenia
Spain Sweden
First demographic dividend
-0.015
-0.010
-0.005
0.000
0.005
0.010
0.015
1950
1955
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
2010
2015
2020
2025
2030
2035
2040
2045
2050
2055
2060g(
L/N
)
Year
FinlandFranceSweden
-0.015
-0.010
-0.005
0.000
0.005
0.010
0.015
1950
1955
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
2010
2015
2020
2025
2030
2035
2040
2045
2050
2055
2060g(
L/N
)
Year
Hungary
Slovenia
Spain
-0.015
-0.010
-0.005
0.000
0.005
0.010
0.015
1950
1955
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
2010
2015
2020
2025
2030
2035
2040
2045
2050
2055
2060g(
L/N
)
Year
Austria
Germany
1960
1970
1980
1990
2000
2010
2020
2030
2040
2050
Year
Austria
Finland
France
Germany
Hungary
Slovenia
Spain
Sweden
Second Deographic Dividend
Conclusions and Discussion There are considerable differences in the level and shape of the
support ratios among European NTA countries for 1950-2060 period.
In the future all European NTA countries are expected to face strong declines in support ratios. In some countries the support ratios are already substantially declining and in others they are just about to start to decline.
In all European NTA countries except Spain and Germany the second demographic dividend is expected to be small, assuming fixed age profiles through time. The opportunity of aging societies in form of a positive second demographic dividend is expected to be heavily dominated by the challenge of a negative first demographic dividend.
End