Introduction

Recent changes in global demographic behavior, including to fertility, mortality, migration, and the sex ratio at birth, have been considerable and many were not widely anticipated in recent decades. In most countries, consistent with the central phase of the global demographic transition, infant mortality fell through the course of the last century and adult life expectancy increased, causing a surge in population growth. The declines in birth rates as part of the final phase of this transition have been particularly sharp, first in developed countries and recently in many developing countries. Before this century is half over, populations in Japan and some European countries are likely to be smaller than they were in 1990, with these declines in total populations being preceded by declines in the number and proportion of people of working age.

The economic implications of these demographic trends and uncertainties are the subject of an already substantial global literature. Recent macroeconomic studies of demographic change have been global in scope, emphasizing the effects of aging on average saving rates and financial flows (Bryant and McKibbin 1998, 2001; Bryant et al. 2003; Faruqee and Muhleisen 2002). This work has clearly demonstrated the substantial implications of demographic change in some regions for economic performance in others. It has, however, fallen short of the complete demographic modeling needed to capture the three principal avenues through which demographic change influences economic performance: labor force growth, average saving rates, and age-specific consumption variation.