Two leading experts—Prof. Albert Park of the Hong Kong University of Science and Technology, and Prof. Jack Goldstone of George Mason University—examined the political and economic ramifications of the population challenges facing emerging markets such as China, India, Brazil, and North Africa. Learn more about the event at http://iems.ust.hk/events/event/political-economic-consequences-demographic-change-emerging-markets-hkust-iems-ey-hong-kong-emerging-market-insights-series/

1. HKUST Institute for Emerging Market Studies (IEMS)
Economic Consequences of
Demographic Change in Emerging Markets
Albert Park

2. Economic Impacts of Population Changes
• Structure of population alters the scale and
product composition of final demand
• Affects households’ division of their
disposable incomes between consumption
and saving (imperfectly understood)
• Size and skill composition of the labor force
– Can affect the marginal product of capital and
hence the level of investment

3. Demographic Transition

4. From Jackson, Howe, and Nakashima (2011)

5. From Jackson, Howe, and Nakashima (2011)

6. Demographic Dividend
• First dividend: with fertility decline, labor
force grows faster than the population, also
freeing resources for investment
• Second dividend?: population aging increases
incentives for individual savings and
investment (including human capital)
– Influenced by family and government transfers
– But dissaving by elderly can reduce aggregate
saving

7. From Jackson, Howe, and Nakashima (2011)

8. From Jackson, Howe, and Nakashima (2011)

9. Key Demographic Trends in China
• Growth of labor force will stop in 2015
• Chinese over 60 years will increase from 128m in 2000 to 350m in 2030

10. Policy Challenges of Aging
• Pension program design
– Ensure financial security in old age
– Encourage work at older ages (extending the
demographic dividend)
– Avoid crowding out private support
• Medical care and long-term care
– Providing universal coverage
– Providing adequate coverage and financing
– Improving quality of care and preventive service

12. Across East Asia, Significant Differences in Shares of
Urban and Rural Workers Receiving a Pension
Figure 4
Across the EAP Region, There are Significant Differences in Shares of
Rural and Urban Workers Receiving Pension Support
China Indonesia Japan
Korea Thailand Vietnam
Sources: China Health and Retirement Longitudinal Study 2011 (CHARLS 2011), Indonesia Family Life Survey 2007 (IFLS 2007), Japanese Study of
Aging and Retirement 2011 (JSTAR 2011), Korean Longitudinal Study of Aging 2010 (KLoSA 2010), Thailand Household Socio-Economic Survey
2011 (SES 2011), Vietnam Household Living Standards Survey 2012 (VHLSS 2012), and Philippines Family Income and Expenditure Survey 2009
(FIES 2009).
Background for forthcoming World Bank Report on Aging in East Asia

13. China (2011)

15. Extending Working Lives
• Requires work capacity at older age (education
and health)
• Pension systems should be work-neutral
– End mandatory retirement
• Allow wage and job flexibility at older ages
• Provide information/support to employers for
investments that raise productivity of older
workers
• Educate public to shift expectations
– Will encourage lifelong investments in human capital

17. Priorities for Supporting Elderly Well-being
• Improve quality of coverage under new social
insurance programs
• Integrate social insurance programs, across
regions and program types (social pensions?)
• Improve quality of preventative health care
services, especially for chronic conditions
• Develop strategy for providing long-term care

18. HKUST Institute for Emerging Market Studies (IEMS)
• Provides thought leadership on
business and policy challenges in
emerging economies
• 40+ Faculty Associates
• Founded in 2013 with support
from EY
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