The Cost of Living Longer: Projections of the Effects of Prospective Mortality Improvement on Economic Support Ratios for Eighteen More Advanced Economies

The aims of this paper are twofold; (1) to forecast mortality for a wide range of more developed countries from 2010-2050 and (2) to simulate the effects of the forecast mortality patterns on economic support ratios under the continuation of current fertility, migration and labour force participation. The mortality forecasts are prepared for eighteen countries using the Poisson Common Factor Model proposed by Li (2013). The effects of mortality on economic support ratios are estimated by comparing the results of projections under the best estimates of the forecast mortality change to the results of projections which assume that mortality remains constant over time. The results of the mortality forecasts show that the projected gains in life expectancy for both sexes are greatest in Japan, Israel, Australia and in East-Central Europe, and are least in the Ukraine, Netherlands, North America and Sweden. Preliminary results show that the ratios of total hours worked to age-weighted populations are projected to fall most in Japan, East-Central and Southern Europe, and least in Sweden and Australia. In all countries the forecast improvement in mortality accounts for less than half the projected reduction in the support ratio. The results show that mortality improvement has the greatest effect on support ratios in Japan and in East-Central European countries. Anticipated mortality improvement is of far lesser significance to Northern and Western European and English-speaking countries. The paper discusses the dependency of the estimated effects of mortality improvement on support ratios on the assumed levels of fertility, migration and age-specific labour force participation and the age structure of the initial population.