Aging and the Macroeconomy

Abstract

This paper develops an overlapping generations model to study the macroeconomic implications of an aging population. We calibrate the model along a transition path from 1950 to 2100 that features rising survival probabilities, an increasing share of college graduates, and rising healthcare costs. The aging of the population leads to increased government spending on Medicare, Medicaid, and Social Security benefits. We find that the increase in the share of college graduates compensates for most of the increase in government spending. Consequently, taxes will only have to rise by a few percentage points to balance the budget in the future even if the current eligibility criteria and benefit levels for social insurance programs are preserved.

Cite this work

No public copy is stored for this record, so only the metadata is cited.

Stored only when both papers are in the corpus — 26 citations exist upstream.