The Economic Challenges of Population Aging in Emerging Markets

Why do studies that examine population aging always come to the same conclusions? Regardless of whether these studies focus on Japan or Germany, Northern Europe or Southern Europe, the developed economies or emerging market economies, they typically suggest that countries will confront a labor shortage which undermines economic growth and that they will confront rising pension and health care costs which call for reduced health care and pension benefits. Are uniform policy recommendations justified because these countries are in fact so similar, or are they rather the result of an undifferentiated and partial analysis? This paper argues that they are the result of a household-focused analysis which fails to take into consideration the very different macroeconomic realities of different countries. From a macroeconomic perspective, this paper examines the broader economic background of emerging markets to understand whether population aging has negative effects on their economic development on the one side, and whether their economic development can cater to an increasing number of old-age dependents on the other.