Abstract
In this study the author examines the effect of the speed of population aging on the financial markets in 11 OECD (The Organisation for Economic Co-operation and Development) countries after controlling the proportion of labor population, the growth rate of real GDP (Gross Domestic Product), the rate of increasing productivity, inflation rate, and the rate of increasing scale of pension market. The author finds that the performance of stock market is affected by complex factors including increasing of average life expectancy, the growth rate of real GDP, the rate of increasing productivity, the inflation rate, the earning rate of stock market and the rate of increasing scale of pension market. Especially, the proportion of economically active people is the most significant factor to explain the stock market performance. Considering the decreasing proportion of economically active people in aging societies, the decrease of productivity and eventually the decrease of earnings from financial markets would be expected.
Highlights
Over the last 30 years, developed countries such as OECD members have experienced a very strong growth of public pension systems to prepare the aging society and the growth is expected to get stronger in the future
In this study the author examines the effect of the speed of population aging on the financial markets in 11 OECD (The Organisation for Economic Co-operation and Development) countries after controlling the proportion of labor population, the growth rate of real GDP (Gross Domestic Product), the rate of increasing productivity, inflation rate, and the rate of increasing scale of pension market
The author finds that the performance of stock market is affected by complex factors including increasing of average life expectancy, the growth rate of real GDP, the rate of increasing productivity, the inflation rate, the earning rate of stock market and the rate of increasing scale of pension market
Summary
Based on the growth accounting which is introduced by Solow (1957), many studies about the impact of aging society on economic growth expect that as the aging progresses, rate of economic growth declines (See, Feyrer (2007), Coulombe and Tremblay (2009), and De-huang and En-jun (2013)). The economic growth is determined by the input factors (labor and capital) and total factor productivity. Where Y is the real GDP, L is labor input, K is the capital commitment, A represents the total factor productivity, and f(.) means the production function. Economic growth increases when there is an increase in inputs such as labor, capital, and improvement on total factor productivity. It is concerned that as aging progresses, especially in decreasing labor input and labor productivity changing, the aging progress will slow down the potential for growth. The decrease in the productive population and labor productivity growth rate due to the aging population reduces the potential growth rate. The. GDP growth rate, which fell sharply in the 2000s, is the result of a complex action of aging and slowed growth rate of labor productivity, hours worked and the productive population. In Japan the reduced growth compared to 1980s seems to be quite severe
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