Macroeconomic Implications of Demographic Change
Population Aging and Intergenerational Cohesion
As the US undergoes a dramatic demographic transformation, the question frequently arises as to whether the US can learn important lessons from Europe, which has "aged" ahead of America. Such lessons might be helpful in predicting social changes as well as indicating which policies might be more or less effective. This project relates to the concern regarding future tension between generations. Population aging changes the fabric of the entire society. It puts strain on the pay-as-you-go financed social security systems and is likely to lead to higher contributions and lower implicit rates of return for the younger generation. At the same time, it moves the political power towards the elderly as the median voter’s age rises. Will such strains tear the social fabric apart? Is the horrible vision of “generational warfare” coined by the media a realistic one? If we want to test whether the horrible vision of “generational warfare” or a break down of intergenerational cohesion has at least some truth to it, we should see it in “Old Europe”. Our approach is to investigate several dimensions of intergenerational cohesion, e.g. family relations, non-family ties, values, and political preferences,. We measure these dimensions by variables collected in the European Social Survey (ESS) and the Survey of Health, Ageing and Retirement in Europe (SHARE). We analyze the relation between intergenerational cohesion and aging on the regional level in order to exploit as much variety as possible. Our findings suggest that intergenerational cohesion is not systematically and significantly related to the age structure of European regions. Both positive and negative interrelations between the old age dependency ratio and our measures of intergenerational cohesion can be found. Some aspects of intergenerational cohesion fare better in older societies, like trust to older and younger family members or that fewer people experience age discrimination. On the other hand there are fewer people having young friends or meeting socially in older regions. We conclude that the fear in the US about aging populations becoming gerontocracies in which the old exploit the young is highly exaggerated. This project, conducted in cooperation with Anette Reil-Held and Gabriel Heller, has been successfully completed with a publication in a Public Policy and Aging Policy Report.