1. Introduction
The heading of the baby boom generations towards retirement will rapidly increase the proportion of elderly in the population of many industrialized countries. Canada is not escaping this demographic phenomenon as the population of seniors is projected to increase from 3.8 million in 1999 to 11.2 million in 2046, accounting for half of the projected growth in the total population (from 30 million to 44.4 million). As a result, population aging will proceed at an unprecedented pace in Canada. The largest part of this increase will take place in the 2011-2031 period as the baby-boomers move into the 65 and plus age group.
The upcoming dramatic demographic change has attracted a lot of attention worldwide and within Canada. However, most of the available analyses on the economic consequences of an aging population have been at the national level.1 National studies may hide important discrepancies in large country like Canada. Indeed, population aging would be more extensive in the poorest provinces in Canada if inter-provincial migration flows follow the average pattern observed during the 1976-1996 period. As shown in Table 1, the old-age dependency ratio is projected to rise between 1996 and 2040 from 16.2 to 56.0 percent in Newfoundland, whereas in Alberta this ratio will rise from 15.5 to only 36.8 percent. No factor in sight seems able to reverse these trends. There is no evidence of any significant increase in the birth rate, nor in the age composition of immigration flows. In Canada, life expectancy is expected to continue to increase over the next several decades, with an additional gain of 4 years for women (to 86 years) and a gain of 6 years for men (to 82 years).
In this paper we present a computable three-good three-region overlapping generations model to investigate the inter-regional impact of population aging in Canada. According to data in Table 1, although Canadian regions share the same projected old-age dependency trend, the level and rate of change differ across them. The main issue in this paper is to what extent the economic effects of the aging shock will be or not be shared across regions. In the next section we present the model in intuitive terms. Section 3 presents the demographic trends of the three regions of the model. Section 4 describes the calibration procedure of the computable model. In Section 5, we discuss the results of the simulation of the aging population shock for the baseline scenario whereas in Section 6 we discuss the sensitivity of these results to some specific parameter values. Section 7 concludes.
Table 1: Old-Age Dependency Ratio in Canada: 1996, 2040
| |
1996 |
2040 |
| Newfoundland |
16.2 |
56.0 |
| Prince Edward Island |
21.8 |
46.9 |
| Nova Scotia |
20.6 |
49.4 |
| New Brunswick |
19.8 |
50.8 |
| Québec |
18.7 |
39.8 |
| Ontario |
19.3 |
36.1 |
| Manitoba |
22.5 |
39.3 |
| Saskatchewan |
25.6 |
43.4 |
| Alberta |
15.5 |
36.8 |
| British Columbia |
20.6 |
40.0 |
| Yukon |
6.8 |
25.7 |
| Northwest Territories |
5.7 |
22.9 |
| Canada |
19.2 |
38.5 |
| Source: Population Projections Section at Statistics Canada |
- 1See for instances Auerbach et al. (1989), Hviding and Mérette (1998) and Miles (1999) for international studies and Fougère and Mérette (2000a, 2000b) for analyses on Canada.
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