Andrew Mason

As their populations age, Japan, the United States, and many other countries face challenging economic prospects. Due to important intergenerational linkages, members of every generation will be affected. Saving may prove to be insufficient and old‐age support systems fiscally unsound. Here we assess the proportional reduction in consumption across all ages that would be required to attain long‐term sustainability. We use a simulation model together with the most extensive data ever compiled to analyze the connections between age structure and the economy. Our goal is to root our analysis in these rich empirical measures of age‐specific economic behavior which provide a straightforward interface with the population age distribution. This approach contrasts with more theoretical models incorporating feedbacks and endogenous behavior while requiring different kinds of assumptions. Sustainability requires both cross‐sectional aggregate balance each year and longitudinal balance for each birth cohort. Specifically, we ask: “Are the baseline age profiles of consumption, labor income, savings, and intergenerational transfers sustainable in a hypothetical demographic steady state that would result from fixed fertility and mortality rates? To what extent would the age profile of consumption have to be altered to achieve sustainability?” Sustainability is calculated for each country using conditions as of three dates: several decades ago (1984 Japan and 1990 US), 2019, and 2065. We find that the intergenerational economies in Japan and the US were close to sustainable at the earlier date, but became seriously unsustainable by 2019. An even greater shortfall would occur given expected fertility and mortality rates for 2065. We discuss reasons for the deterioration in sustainability—population aging, differences in economic behavior, and public policy. Given 2019 conditions long‐run sustainability in Japan would require a 15% reduction in consumption (relative to labor income with an underlying upward trajectory from expected productivity growth). With the projected fertility and mortality conditions of 2065, a 19% reduction would be required to achieve sustainability. For the US, the corresponding reductions would be 9% for 2019 and 12% for 2065 conditions.

We examine the impact of firm‐specific investor sentiment (FSIS) on stock returns for negative and positive earnings surprises. Using a measure constructed from firm‐specific tweets, we find that FSIS has a greater impact on stock returns for negative relative to positive earnings surprises. We further show that the impact of FSIS is greater for firms whose valuation is uncertain and difficult to arbitrage. Moreover, we provide evidence of return reversals over post‐announcement periods. Our results highlight the importance of FSIS around earnings announcements.

New estimates of economic flows by age combined with population projections show that in the coming decades (1) global GDP growth could be slower by about 1 percentage point per year, declining more sharply than population growth; (2) GDP will shift toward sub‐Saharan Africa more than population trends suggest; (3) living standards of working‐age adults may be squeezed by high spending on children and seniors; (4) changing population age distribution will raise living standards in many lower‐income nations; (5) changing economic life cycles will amplify the economic effects of population aging in many higher income economies; and (6) population aging will likely push public debt, private assets, and perhaps productivity higher. Population change will have profound implications for national, regional, and global economies.

La baisse de la fécondité et l'allongement de la durée de la vie amènent au vieillissement de la population et au ralentissement ou même à la baisse de la croissance démographique. Tandis que le ralentissement de la croissance démographique réduit la nécessité d'épargner, le vieillissement de la population impose des coûts liés à la dépendance des personnes âgées qui sont particulièrement lourds pour le secteur public. Le taux de fécondité est-il trop faible ? Le projet des Comptes de transferts nationaux (National Transfer Accounts ou NTA) fournit des données permettant de quantifier les coûts liés à la dépendance. Au vu de la répartition par âge actuelle des impôts et prestations dans les pays à revenu élevé et à revenu moyen supérieur, un taux d'environ trois naissances par femme permettrait de maximiser le ratio de soutien public. Les profils d'âge inclusifs de consommation et de revenus du travail sont toutefois plus pertinents en termes de niveau de vie. Les ratios de soutien correspondants sont maximisés par un taux de fécondité légèrement supérieur à deux naissances par femme. En allant un peu plus loin et en prenant en compte la baisse de l'épargne, un taux égal à 1,5 naissance par femme dans les pays à revenu moyen supérieur et à 1,8 naissance par femme dans les pays riches industrialisés permettrait de maximiser le niveau de vie. Au sein d'économies ouvertes, ces résultats seraient légèrement différents. Par ailleurs, la prise en compte du capital humain influerait également quelque peu sur ces résultats. Classification JEL : J11, J14, J18.

Longer lives and fertility far below the replacement level of 2.1 births per woman are leading to rapid population aging in many countries. Many observers are concerned that aging will adversely affect public finances and standards of living. Analysis of newly available National Transfer Accounts data for 40 countries shows that fertility well above replacement would typically be most beneficial for government budgets. However, fertility near replacement would be most beneficial for standards of living when the analysis includes the effects of age structure on families as well as governments. And fertility below replacement would maximize per capita consumption when the cost of providing capital for a growing labor force is taken into account. Although low fertility will indeed challenge government programs and very low fertility undermines living standards, we find that moderately low fertility and population decline favor the broader material standard of living.