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F and D logo
A quarterly magazine of the IMF
  September 2006
Volume 43, Number 3

The Economics of Demographics

Booms, Busts, and Echoes

David E. Bloom and David Canning
How the biggest demographic upheaval in history is affecting global development. This issue of F&D looks at the many facets of the impact of demographic change on the global economy and examines the policy adjustments needed in both the developed and the developing world.

Asia: Ready or Not
Peter S. Heller
The challenges faced by the industrial countries in the West and Japan with the prospective retirement of the baby-boom generation are well recognized. But less appreciated is the fact that many developing Asian countries face their own demographic "time bomb."

Global Migration
Jeffrey G. Williamson
Two centuries of mass migration offers insights into the future of global movements of people. Population aging in the postindustrial part of the world may increase the demand for immigrant labor, but a growth slowdown in host countries is likely to offset it.

Can Europe Afford to Grow Old?
Giuseppe Carone and Declan Costello
The European Union must face up to recent projections showing that aging will have a major economic and budgetary impact affecting labor markets, economic growth, and public finances. Policymakers need to make adjustments so that public finances withstand the pressure.

Reform in Europe: What Went Right?
Anthony Annett
Successful reforms in Denmark, Ireland, the Netherlands, and the United Kingdom can offer valuable lessons for the rest of the EU. All four countries adopted winning combinations of fiscal adjustment and labor and product market reform.

spacer Pension Challenges in an Aging World
Adair Turner
Except where fertility rates are very low, needed pension system adjustments look manageable. But in all countries, the principle of proportional rises in pensionable ages is appropriate to cope with increasing longevity, says Turner, who headed the U.K.'s Pensions Commission.

Investing in the Youth Bulge
Emmanuel Y. Jimenez and Mamta Murthi
With the right investments, developing countries can turn their large youth populations into a boon. They need to broaden opportunities by improving education, meeting demands for higher skill levels, easing labor market entry, and providing better information to students.

Aging and Financial Markets
W. Todd Groome, Nicolas Blancher, and Parmeshwar Ramlogan
The implications of population aging for financial markets are getting greater attention. The markets can play an important role in the management of age-related risks, but governments will also need to act as managers of key long-term risks related to aging.

Gauging the Cost of Aging
John Bryant and Audrey Sonerson
Population aging is not the main cause of rising government health expenditure in New Zealand, where "non-demographic" factors—such as higher wages for health workers, rising administrative costs, new treatments, and better coverage of the population—outweigh demographic expenditure drivers.


Letter from the Editor

Letters to the Editor
Need to boost aid to the private sector; AIDS data falling short?; Barking up the wrong tree.

In Brief

Lipsky, Caruana join IMF
Flying more
Population pressures

People in Economics

Ahead of His Time
Laura Wallace
Robert Mundell, a pioneer of modern international economics, received the Nobel Prize in 1999 for his analysis of monetary and fiscal policy under different exchange rate regimes and his analysis of optimum currency areas. He speaks to F&D about exchange rates, the euro, his work in China, and his castle in Italy.

Picture This

Global Demographic Trends
During the past 50 years, the world's population has increased dramatically—a trend that is projected to continue. Most future growth will occur in less developed countries, where the population is increasing more than five times as fast as that in developed countries.

Back to Basics

What Is the Demographic Dividend?
Ronald Lee and Andrew Mason
As countries go through a "demographic transition" from a largely rural agrarian society with high fertility and mortality rates to a predominantly urban industrial society with low fertility and mortality rates, there is a window of opportunity to reap a "demographic dividend," resulting in higher living standards.

Book Reviews

Global Capitalism: Its Fall and Rise in the Twentieth Century, DarJeffry A. Frieden

Emerging Capital Markets in Turmoil: Bad Luck or Bad Policy, Guillermo A. Calvo

The White Man's Burden: Why the West's Efforts to Aid the Rest Have Done So Much Ill and So Little Good, William Easterly

Straight Talk

From Paternalistic to Enabling
Raghuram Rajan
India needs to exchange its paternalistic, directive government, which seeks to remedy every wrong through a subsidy, a quota, or a scheme, for one that creates an enabling environment for the people and unleashes their entrepreneurial zeal.

Country Focus

Kazakhstan's economy has performed strongly over the past half decade. A rapid expansion of hydrocarbons production, supported by a prudent macroeconomic policy framework, has led to major economic and social gains.