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  • Economics of the Elderly; Economics of the Handicapped; Non-labor Market Discrimination x
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Mr. Edgardo Ruggiero, Mr. Peter S. Heller, Mr. Menachem Katz, Mr. Robert A Feldman, Mr. Richard Hemming, Mr. Peter Kohnert, Ziba Farhadian, Mr. Donogh McDonald, Ahsan S. Mansur, and Mr. Bernard Nivollet

Abstract

Most of the seven major industrial countries are now experiencing significant changes in their demographic structure. A persistent pattern of declining fertility and improving life expectancy has created major segments of the population that are already relatively aged or will become so in the near future. This paper examines the impact of prospective demographic trends on the level and structure of social expenditure by the governments of the seven major industrial countries (the Group of Seven) through the year 2025.

International Monetary Fund

This paper examines economic developments and policies in Canada during 1990–95. Spurred by the robust growth in the United States and the easing of monetary conditions between 1991 and 1993, economic growth in Canada continued to strengthen during 1994. Real GDP grew by 4.5 percent in 1994 after growing by 2.2 percent in 1993 and 0.6 percent in 1992. Economic growth in 1994 was led by exports and investment in machinery and equipment. However, growth was more broadly based in 1994; private consumption strengthened, and there was a rebound in residential and nonresidential construction.

International Monetary Fund

This Selected Issues paper addresses some of the key policy and economic challenges facing the Canadian economy. The paper presents a new approach to predicting the business cycle in the context of the Canadian economy. This approach uses a range of parametric and nonparametric tests to gauge the ability of various indicators to predict turning points in the business cycle. The paper also presents a model that links the inflation rate to the business cycle and the rates of change in the exchange rate and in unit labor costs.

International Monetary Fund

This Selected Issues paper reviews Canada’s business tax system, looking at the incentive effects of the country’s business tax regime and their implications for output and employment. It presents estimates of marginal effective tax rates on corporate-source income in Canada and comparator countries across sectors, asset classes, means of finance, and asset ownership. The paper also examines labor markets in Canada. It notes that unemployment rates in Canada have risen across all demographic groups, industries, and regions, although young and less-educated workers and workers in agriculture and primary industries have been most severely affected.

Mr. Edgardo Ruggiero, Mr. Peter S. Heller, Mr. Menachem Katz, Mr. Robert A Feldman, Mr. Richard Hemming, Mr. Peter Kohnert, Ziba Farhadian, Mr. Donogh McDonald, Ahsan S. Mansur, and Mr. Bernard Nivollet

Abstract

Most of the seven major industrial countries are now experiencing significant changes in their demographic structure. A persistent pattern of declining fertility and improving life expectancy has created major segments of the population that are already relatively aged or will become so in the near future. This substantial change in the demographic structure is likely to have far-reaching implications. As to the economic ramifications alone, it is likely to affect the size, structure, and dynamics of the labor force and may cause difficulties in accommodating an aging work force; it may significantly challenge the maintenance of sustained and buoyant growth; and it is likely to alter the demand for goods and services. As to implications for the public sector, it is likely to influence the demand not only for pensions, but for other social expenditures as well (on education, medical care, etc.,). Furthermore, such a change could pose serious financial problems as the working-age segment of the population shrinks in proportion to the retired segment heightening the likelihood of intergenerational conflict. In most countries, concern over the aging problem has led to considerable discussion and the enactment of specific policy measures in the areas of pensions and medical care. Nevertheless, despite the potential importance of this issue, none of the seven major industrial countries has undertaken a comprehensive analysis of the combined impact of an aging population on the various components of government expenditure.1

Mr. Edgardo Ruggiero, Mr. Peter S. Heller, Mr. Menachem Katz, Mr. Robert A Feldman, Mr. Richard Hemming, Mr. Peter Kohnert, Ziba Farhadian, Mr. Donogh McDonald, Ahsan S. Mansur, and Mr. Bernard Nivollet

Abstract

An important problem faced in undertaking this study, particularly given its cross-country focus, was how to define the social expenditure of the government. Clearly, one should include expenditure on education, medical care, pensions, unemployment compensation, and income maintenance for the poor. The dividing line then becomes blurred. Should one include expenditure on family allowances? veterans benefits? workmen’s compensation? Should pensions of central government or public enterprise employees be included or treated analogously to the pension expenditure associated with private sector employees? Unfortunately, any cross-country comparison of government social expenditure by program is fraught with methodological difficulties, particularly for the governments of the seven major industrial countries. The structure of programs, the degree of public sector involvement, the instruments of intervention, and the level of benefits vary widely—thus rendering any comparison subject to numerous caveats.

Mr. Edgardo Ruggiero, Mr. Peter S. Heller, Mr. Menachem Katz, Mr. Robert A Feldman, Mr. Richard Hemming, Mr. Peter Kohnert, Ziba Farhadian, Mr. Donogh McDonald, Ahsan S. Mansur, and Mr. Bernard Nivollet

Abstract

A significant change is projected in the demographic structure of the seven major industrial countries over the next several decades. Through the year 2000 much of this change can be predicted with reasonable certainty, since changes in demographic parameters are not likely to offset the impact of the movement of existing population cohorts through the age structure. Looking beyond the turn of the century, unanticipated changes in fertility rates or life expectancies may influence the age structure of the population. This chapter reviews current demographic projections for the seven major industrial countries, examines their underlying determinants, and briefly explores their sensitivity to more extreme demographic assumptions.

Mr. Tamim Bayoumi
Canadian public pension plans are run on a "pay-as-you-go" basis. As the baby boom ages, contribution rates for the two main plans are projected to rise significantly, from their current level of around 5 percent of eligible earnings to over 13 percent by 2030. An alternative is to set contribution rates at their underlying long-term levels. Such a policy would imply a significant rise in current contribution rates, to 10-10½ percent of eligible earnings, but would allow the system to cope with the retirement of the baby boom generation without recourse to borrowing or significant increases in contribution rates.
Mr. Daniel Leigh, Mr. David Hauner, and Mr. Michael Skaarup
Rising longevity, falling fertility rates, and the retirement of the baby boom generation will substantially raise age-related government spending in most advanced and many emerging market countries. This paper assesses the evolution of fiscal sustainability for each of the G-7 countries using two standard primary gap indicators. The estimated fiscal adjustment required to ensure long-run fiscal sustainability is substantial for all G-7 countries. In particular, ensuring fiscal sustainability would require an average improvement in the primary balance of about 4 percentage points of GDP. While the overall adjustment required to achieve long-run fiscal sustainability in G-7 countries is large, there are significant growth benefits to putting public finances on a sustainable footing in the near term versus delayed adjustment.
Patrick A. Imam
Abstract Empirical evidence is mounting that, in advanced economies, changes in monetary policy have a more benign impact on the economy—given better anchored inflation expectations and inflation being less responsive to variation in unemployment—compared to the past. We examine another aspect that could explain this empirical finding, namely the demographic shift to an older society. The paper first clarifies potential transmission channels that could explain why monetary policy effectiveness may moderate in graying societies. It then uses Bayesian estimation techniques for the U.S., Canada, Japan, U.K., and Germany to confirm a weakening of monetary policy effectiveness over time with regards to unemployment and inflation. After proving the existence of a panel co-integration relationship between ageing and a weakening of monetary policy, the study uses dynamic panel OLS techniques to attribute this weakening of monetary policy effectiveness to demographic changes. The paper concludes with policy implications.