Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Golden Aging Golden Aging Prospects for Healthy, Active, and Prosperous Aging in Europe and Central Asia Maurizio Bussolo, Johannes Koettl, and Emily Sinnott © 2015 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington, DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org Some rights reserved 1 2 3 4 18 17 16 15 This work is a product of the staff of The World Bank with external contributions. The fi ndings, interpretations, and conclusions expressed in this work do not necessarily refl ect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. 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Contents About the Authors and Contributors . xv Foreword . xix Acknowledgments . xxi Abbreviations . xxv Regional Classifications Used in This Report . xxix Overview: Golden Aging . 1 Introduction . 1 The Demographics of Europe and Central Asia and Those of the Rest of the World . 5 Mixed Economic Consequences . 13 A Comprehensive Policy Agenda . 21 Notes . 30 References. 30 Part I The Demographic Transition in Europe and Central Asia . 33 Overview . 35 The Demographic Transition and the “Golden Age” . 35 The Effects of Fertility Declines on Aging across the Region . 36 High Rates of Disease and Disability in Europe and Central Asia . 37 Limiting the Rise in Dependency Ratios and Improving Health Outcomes in the Region . 37 Migration Affects Demographics More in the Long Run . 38 Reference . 38 1 The Drivers of Aging in Europe and Central Asia . 39 Introduction . 39 The Aging Populations of Europe and Central Asia . 39 The Effects of Declining Fertility on Aging and Population Growth . 42 The Slower Improvement of Life Expectancy in Europe and Central Asia. 52 The Contribution of Migration to Aging in Some Countries . 56 Toward More Balanced Age Structures over the Next Half-Century . 62 Notes . 71 References . 72 v vi ● Golden Aging 2 Improving Health Outcomes in the Transition to the “Golden Age” . 77 Introduction . 77 Lengthy Disability for People in Europe and Central Asia . 77 Declines in the Health of the Older Population in Some Countries since 1959 . 79 Women’s Unequal Burden of Caring for the Dependent . 81 Cardiovascular Disease and Cancer, the Principal Causes of Premature Death in the Region . 89 Achieving More Healthy Aging in the Region . 92 Notes . 94 References . 95 Part II The Economic Consequences of Population Aging . 99 Overview . 101 Aging and the Economy: Challenges and Opportunities . 101 The Economic Impact of Aging in Europe and Central Asia . 104 Note . 106 References . 106 3 The Macroeconomic Impact of Population Aging . 109 Introduction . 109 The Diverse Effects of Aging on Income and Growth . 110 The Effect of Aging on Savings and Labor Force Participation . 118 The Links between Aging and Public Finances . 136 Annex 3A: Brief Description of the Overlapping Generations Model . 151 Annex 3B: Population Aging and the Labor Force . 153 Annex 3C: Aging and Public Expenditures in Bulgaria in the Base Case Scenario . 158 Notes . 161 References . 162 4 The Effects of Aging on Productivity: Diverse, Not Alarming . 167 Introduction . 167 Transient Effects of Aging on the Productivity of the Workforce . 168 The Stability of the Human Capital Stock and the Labor Force . 170 The Improving Quality of Education . 171 The Skills of Older Workers: Shifting, Not Declining . 178 How Firms Are Adjusting to the New Comparative Advantages. 185 Does Labor Reallocation Become Less Efficient with Aging? . 188 Does Aging Slow Innovation and Technology Adaption? . 193 Does Entrepreneurship Decline with Aging? . 198 The Mixed Impact of Aging on Productivity . 205 Notes . 206 References . 206 Contents ● vii 5 Aging and Poverty and Inequality . 213 Introduction ..