Population aging has widely discussed implications for social planning, health care, labor force structural changes, and entitlement programs. As shown in Figure 3-6, percentage growth in the elderly age cohorts is predicted strongly by all projections. The figure shows the percentage of elderly age cohorts using the medium projection data. Importantly, it will be a continuous process over the entire 21st century, even though total population size is forecast in these cases to stabilize during the latter half of the century.
The detailed economic effects of such a profound and rapid change in social structure are not well understood (Eberstadt, 1997). The problem is considered below in the discussion of the impact of population dynamics on economic development. In short, conventional wisdom takes a more or less neutral view of the effect of population growth, including the impacts of aging, on the rate of economic growth (Hammer, 1985; Kelley, 1988; National Research Council, 1986). Lowered population growth rates (and concomitant aging) might have a beneficial effect on the economy through reduced youth dependency ratios, which result in higher savings rates (Higgins and Williamson, 1997). Also, population aging could reduce labor supply and thus reduce potential economic growth. Against this argument, labor scarcity induces higher wages that in turn are a powerful incentive to increase labor productivity. Increasing productivity (per capita economic output) would balance shortfalls from possible reductions in the labor force (Disney, 1996). However, lowered fertility and mortality rates will also cause the elderly dependency ratio to increase, which might lead to a trend of lower savings, characteristic of elderly cohorts, which have a reduced incentive to save. In terms of public savings, without institutional reforms aging could eventually lead to severe strains on social security and health care programs supported by governments and thus to reduced governmental savings (US Council of Economic Advisors, 1997).
Interestingly, a case has been made that aging may have significant impacts on future CO2 emissions. The suggested mechanism for this relates to household formation rate (MacKellar et al., 1995). An aging population has a greater proportion of people in older age groups. Assuming age-specific household formation rates remain constant over time, as more people enter the older age cohorts the overall household formation rates will increase. This increase will be accompanied by a decline in the number of people per household (a process already observed in industrialized countries) and is related to reduced fertility rates. As small households consume significantly more energy per person than large households (Ironmonger et al., 1995), the various effects suggest CO2 emissions will increase with increased aging (MacKellar et al., 1995). Important uncertainties of this effect remain, not least because household formation rates of aging populations are not well understood.
Urbanization is also a strongly anticipated demographic trend. Since 1970, most urban growth has taken place in developing countries. It is caused by both internal increases of the existing urban population and rural-to-urban migration (UN, 1997b).
Urbanization, though, is not a rigorously modeled phenomenon within the projections. Essentially, future urban and rural growth and decline rates are simply assumed and applied to the projected population levels. Thus, the projections contain no explicit feedback mechanism from urbanization to population growth, even though urbanization is an important factor in fertility rate changes (urban populations generally have lower fertility rates than rural populations). Instead, urbanization rates are considered implicitly within the projections of future fertility. It is estimated that by 2010 more than half of the world's population will live in urban areas (UN, 1996).
Urbanization will lead to a rapid expansion of infrastructure and especially transportation uses (Wexler, 1996). In addition, urban households in developing countries use significantly more fossil fuels, as opposed to biofuels, than do rural households. However, the choice of fuel is predominantly an income effect rather than a function of locale (see Murthy et al., 1997), even within urban settings. Hence, urbanization exerts its influence on emissions primarily via higher urban incomes compared to rural ones. Generally, opportunities for higher income are considered an important driver of rural-to-urban migration, and so contribute to rising urbanization rates (HABITAT, 1996). Urbanization is obviously an important factor for future GHG emissions.
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