Who Gains from the Demographic Dividend? Forecasting Income by Age

Sang-Hyop Lee, University of Hawaii at Manoa
Andrew Mason, University of Hawaii at Manoa

Changes in age structure, known as the demographic dividend, have led to growth in per capita income substantially greater than growth in output per worker. In the future, however, the phenomenon will work in reverse as growth in the total population is dominated by growth in older age groups. This paper addresses how intergenerational transfers respond to the changes in age structure that underlie the demographic dividend and the coming demographic burden. We use a new methodology, the overlapping families (OLF) model, which allows the analysis of intergenerational familial effects using age-specific aggregate data. The model is estimated for Taiwan using synthetic panel data constructed from repeated cross-sectional household surveys. Our results suggest that changes in population age structure have important effects on the generational distribution of income. Child generations have gained the most from the demographic dividend, while pensioner generations will be least affected by population aging.