POPULATION AGING IN A SMALL OPEN-ECONOMY WITH A PUBLIC PENSION SYSTEM

The first part of the article discusses the phenomenon of population aging in the OECD area. It stems from two distinct sources: On one hand, fertility rates have fallen, and on the other life expectancy at birth has increased. The projected near-doubling of the so-called old-age dependency ratio in many countries (including Denmark) will put public pension systems under pressure, as illustrated by some simple calculations. The second part shows how recent macroeconomic theory can be used to appraise macroeconomic consequences of population aging in a small open economy with a public pension system.