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Most economic developments are hard to predict. Considerable uncertainty surrounds forecasts for output growth, inflation, and unemployment a year from now, for instance. But demographic developments are different in this respect. Although demographic surprises abound, the major trends build slowly, and the broad contours of medium-term outcomes become discernible well in advance. Given the decreases in fertility rates and the increases in life expectancy that have already occurred in most industrial countries, we can be pretty certain that the population will age rapidly in coming decades. As one result, the ratio of the population aged 65 and over to the population of working age will likely rise sharply. Coincidentally, as child mortality in Third World nations has declined, the ensuing baby booms have helped to drive a predictable surge in emigration to the aging industrial countries. Since child mortality rates in the Third World continue to fall, large-scale migration will likely characterize the decades ahead. However, while we can discern the general trajectory of demographic trends, the uncertainty surrounding these projections is huge. Will world population growth simply slow in coming decades, or will it actually turn negative?
Some consequences of future demographic trends, like the effect of population aging on the finances of pay-as-you-go social insurance systems, have been widely discussed. But much is still unknown about how population shifts will affect the economy, particularly as some forecasted demographic developments are entirely unprecedented. Never before in human history have individual fertility choices led national populations to shrink for extended periods, for instance. Accordingly, demographers and economists have many issues to explore and a growing body of work to synthesize.
With these goals in mind, the Federal Reserve Bank of Boston brought together an international group of economists, demographers, and other social and biological scientists to examine the topic "Seismic Shifts: The Economic Impact of Demographic Change" at the Bank's forty-sixth economic conference. Early sessions covered lessons from previous episodes of demographic shock, an assessment of official demographic projections for the next half century, and the effect of demographic change on U.S. labor markets. On the second day, participants explored the fiscal impact of U.S. demographic change, the effect of demographic trends on global flows of labor and capital, and the policy implications of...