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In the first half of this century in many of today's developed countries, the proportion of voting age populations 65 years old or older will roughly double. As voting age populations age, the proportion of net contributors to national budgets (mainly through taxes) will fall and the proportion of net beneficiaries (mainly through public pension and health care benefits) will rise. By mid-century in many wealthy countries, a near majority of electorates will become net beneficiaries of government expenditures, producing unprecedented changes in their political landscapes. We analyze three aspects of this phenomenon in Germany, Japan, and the United States.

In the first half of this century in many of today's developed countries, the proportion of voting age populations 65 years old or older will roughly double. As voting age populations age, the proportion of net contributors to national budgets (mainly through taxes) will fall and the proportion of net beneficiaries (mainly through public pension and health care benefits) will rise. By mid-century in many wealthy countries, a near majority of electorates will become net beneficiaries of government expenditures, producing unprecedented changes in their political landscapes. We analyze three aspects of this phenomenon in Germany, Japan, and the United States.

BACKGROUND: Coping with aging populations is a challenge for most developed countries. Supporting non-working adults can create an unsustainable burden on those working. One way of dealing with this is to raise the normal pension age, but this has proven unpopular. A complementary approach is to raise the average labor force participation rate. These policies are generally more politically palatable because they often remove barriers, allowing people who would like to work to do so. OBJECTIVE: To conceptualize and estimate the trade-off between pension age and labor force participation rate policies. METHODS: We project the populations of European countries and apply different levels of labor force participation rates to the projected populations. We introduce the notion of a relative burden, which is the ratio of the fraction of the income of people in the labor market in 2050 that they transfer to adults out of the labor market to the same fraction in 2009. We use this indicator to investigate the trade-offs between changes in normal pension ages and the general level of labor force participation rates. RESULTS: We show that, in most European countries, a difference in policies that results in an increase in average labor force participation rates by an additional one to two percentage points by 2050 can substitute for a one-year increase in the normal pension age. This is important because, in many European countries, without additional increases in labor force participation rates, normal pension ages would have to be raised well above 68 by 2050 to keep the burden on those working manageable. CONCLUSIONS: Because of anticipated increases in life expectancy and health at older ages as well as because of financial necessity, some mix of increases in pension ages and in labor force participation rates will be needed. Pension age changes by themselves will not be sufficient.

BACKGROUND: Coping with aging populations is a challenge for most developed countries. Supporting non-working adults can create an unsustainable burden on those working. One way of dealing with this is to raise the normal pension age, but this has proven unpopular. A complementary approach is to raise the average labor force participation rate. These policies are generally more politically palatable because they often remove barriers, allowing people who would like to work to do so. OBJECTIVE: To conceptualize and estimate the trade-off between pension age and labor force participation rate policies. METHODS: We project the populations of European countries and apply different levels of labor force participation rates to the projected populations. We introduce the notion of a relative burden, which is the ratio of the fraction of the income of people in the labor market in 2050 that they transfer to adults out of the labor market to the same fraction in 2009. We use this indicator to investigate the trade-offs between changes in normal pension ages and the general level of labor force participation rates. RESULTS: We show that, in most European countries, a difference in policies that results in an increase in average labor force participation rates by an additional one to two percentage points by 2050 can substitute for a one-year increase in the normal pension age. This is important because, in many European countries, without additional increases in labor force participation rates, normal pension ages would have to be raised well above 68 by 2050 to keep the burden on those working manageable. CONCLUSIONS: Because of anticipated increases in life expectancy and health at older ages as well as because of financial necessity, some mix of increases in pension ages and in labor force participation rates will be needed. Pension age changes by themselves will not be sufficient.

Over the past decade, India has experienced rapid economic growth along with increases in levels of air pollution. Our goal is to examine how alternative policies for air pollution abatement affect well-being there. In particular, we estimate the effects of policies to reduce the levels of ambient fine particulates (PM2.5), which are especially harmful to human health, on well-being, quantified using the United Nations' human development index (HDI). Two of the three dimensions of this index are based on gross domestic product (GDP) per capita and life expectancy. Our approach allows reductions in PM2.5 to affect both of them. In particular, economic growth is affected negatively through the costs of the additional pollution control measures and positively through the increased productivity of the population. We consider three scenarios of PM2.5 abatement, corresponding to no further control, current Indian legislation, and current European legislation. The overall effect in both control scenarios is that growth in GDP is virtually unaffected relative to the case of no further controls, life expectancy is higher, and well-being, as measured by the HDI, is improved. In India, air pollution abatement investments clearly improve well-being.

Over the past decade, India has experienced rapid economic growth along with increases in levels of air pollution. Our goal is to examine how alternative policies for air pollution abatement affect well-being there. In particular, we estimate the effects of policies to reduce the levels of ambient fine particulates (PM2.5), which are especially harmful to human health, on well-being, quantified using the United Nations' human development index (HDI). Two of the three dimensions of this index are based on gross domestic product (GDP) per capita and life expectancy. Our approach allows reductions in PM2.5 to affect both of them. In particular, economic growth is affected negatively through the costs of the additional pollution control measures and positively through the increased productivity of the population. We consider three scenarios of PM2.5 abatement, corresponding to no further control, current Indian legislation, and current European legislation. The overall effect in both control scenarios is that growth in GDP is virtually unaffected relative to the case of no further controls, life expectancy is higher, and well-being, as measured by the HDI, is improved. In India, air pollution abatement investments clearly improve well-being.