Demographic Transition, Economic Growth and End-of-Life Care

Europe is experiencing a dramatic shift in its demographic structure, ending three centuries of unprecedented population growth. There are few empirical estimates of the realised effect of such a process on economic performance. The first chapter attempts to fill this gap in the literature by assessing the impact of demographic transition in six European countries between 1971 and 2019. Unlike most studies in the field that rely on problematic Cobb-Douglas production functions, we adopt an open-economy approach under the premise that growth is balance-of-payments constrained in the long run. Applying time-varying-parameter estimation techniques, we compute the growth rate compatible with equilibrium in the balance-of-payments (yBP) and show it is a good predictor of output growth trends. We proceed by investigating the importance of population dynamics as one of its determinants. The obtained effects are moderate, and there is significant heterogeneity between countries. In Italy, for instance, a 10-points increase in the old-age dependency ratio is associated with a 3% loweryBP, while in France, we have the opposite effect. Population decline effects are conditional to controlling for migration, with Germany and Austria differentiating themselves from their SouthernEurope counterparts.