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Population Ageing in New Zealand - Implications for Living Standards and the Optimal Rate of Saving - WP 03/10

Publication Details

  • Population Ageing in New Zealand - Implications for Living Standards and the Optimal Rate of Saving
  • Published: Jun 2003
  • Status: Current
  • Authors: Bryant, John; Guest, Ross; Scobie, Grant M
  • JEL Classification: D9; E21; J11
  • Hard copy: Available in HTML and PDF formats only.
 

Population Ageing In New Zealand: Implications for Living Standards and the Optimal Rate of Saving

New Zealand Treasury Working Paper 03/10

Published: June 2003

Authors: Ross Guest, John Bryant & Grant Scobie

Abstract

Over the next 50 years, New Zealand’s population will age substantially. There has been wide debate about whether New Zealand should prepare for population ageing by increasing national savings. The debate had not, however, involved explicit consideration of possible time paths for savings, consumption, debt, and other relevant macroeconomic variables; nor have explicit principles been offered for determining which of these time paths are to be preferred. This paper addresses the question of choosing time paths through the use of a Ramsey-Solow model of optimal saving, adapted for investigating problems of population ageing. The results suggest that population ageing alone would not justify increases in national savings rates beyond those envisaged by current policy. The cost of ageing in terms of reduced real consumption is not large enough to justify large additional savings beyond those currently predicted, and the concomitant reduction in current consumption. The findings concerning national savings and living standards are robust to a variety of specifications of demographic conditions, interest rates, and productivity growth.

Table of Contents

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Abstract

Table of Contents

List of Tables

List of Figures

1 Introduction

2 Demographic projections

3 Analytical framework

4 Simulation results

5 Discussion and Conclusion

Appendix 1 Further details on the demographic projections

Appendix 2 Further details on the simulations

References

twp03-10.pdf (386 KB)pp. 41

List of Tables

List of Figures

Acknowledgements

The paper has benefited from comments by Iris Claus, John Creedy, Richard Disney, and Brian McCulloch.

Disclaimer

The views expressed in this Working Paper are those of the authors and do not necessarily reflect the views of the New Zealand Treasury. The paper is presented not as policy, but with a view to inform and stimulate wider debate.

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