CONGRESS OF THE UNITED STATES

CONGRESSIONAL BUDGET OFFICE

A

PAPER

CBO

Global Population Aging

in the 21st Century and

Its Economic Implications

DECEMBER 2005

A Series on Immigration

The Congress of the United States O Congressional Budget Office

CBO

Global Population Aging in the 21st 

Century and Its Economic Implications

December 2005

A

PAPER

Preface

The world is in the midst of a great demographic transition. The world population nearly 

quadrupled during the 20th century and is projected to grow by roughly 50 percent before 

stabilizing during the late 21st century. That transition is expected to leave the population 

much larger and, on average, older than it was previously—developments that have farreaching implications for societies and governments throughout the world and for how they 

are likely to interact.

This paper, requested by the Chairman and Ranking Member of the Senate Finance Committee, is part of a series of reports by the Congressional Budget Office (CBO) that presents facts 

and research on immigration. It describes historical and projected population trends in different regions of the world and discusses current research on the international economic implications of those trends. Such information will help inform CBO’s projections of the domestic 

and international economies and of the federal budget. In keeping with CBO’s mandate to 

provide objective, nonpartisan analysis, this paper makes no recommendations.

Douglas Hamilton is coordinating CBO’s series of reports on immigration. Robert

Shackleton and Tracy Foertsch wrote the paper, with assistance from Elif Arbatli. David 

Brauer, Ufuk Demiroglu, Robert Dennis, Douglas Hamilton, Arlene Holen, Juann Hung, 

Kim Kowalewski, Noah Meyerson, Ben Page, John Peterson, Jonathan Schwabisch, and

Sven Sinclair provided comments on early drafts of the paper, as did David Bloom of the

Harvard School of Public Health and Warwick McKibbin of the Australian National University. (The assistance of external reviewers implies no responsibility for the final product, which 

rests solely with CBO.)

Janey Cohen edited the paper, and Loretta Lettner proofread it. Maureen Costantino prepared 

the paper for publication and designed the cover, Lenny Skutnik produced the printed copies, 

and Annette Kalicki and Simone Thomas produced the electronic version for CBO’s Web site 

(www.cbo.gov).

Douglas Holtz-Eakin

Director

December 2005

Summary vii

Introduction 1

Sources of the Demographic Transition 1

Mortality and Life Expectancy 2

Fertility 3

Momentum 5

Migration 5

The Phases of the Transition 5

Past and Projected Population Trends 6

Projections 6

Uncertainty in Projections 11

The Economic Effects of the Demographic Transition 17

Different Effects of Changes in Mortality and Fertility 19

Saving, Retirement, and Returns 19

International Effects 21

The Influence of Public Policy 22

Appendix A: The Phases of the Demographic Transition:

An Illustrative Example 25

Appendix B: Definition of Regions 29

References 31

Figures

1. Life Expectancy at Birth, 1950 to 2050 3

2. Total Fertility Rates, 1950 to 2050 4

3. World Population Growth, 1950 to 2005 7

4. Population, 1950 to 2050 7

5. Youth Dependency Ratios, 1950 to 2050 9

6. Old-Age Dependency Ratios, 1950 to 2050 9

7. Population Structure During the Demographic Transition 12

CONTENTS
VI GLOBAL POPULATION AGING IN THE 21ST CENTURY AND ITS ECONOMIC IMPLICATIONS

8. Uncertainty in Population Projections 16

9. Working-Age Population Shares, 1950 to 2050 22

A-1. Illustrative Crude Birth and Death Rates 26

A-2. Population Pyramid for the Illustrative Demographic Transition 27

Boxes

1. Sources of Population Projections 8

2. Fertility Rates in China and India 10

3. How People’s Saving Changes over Their Lifetimes 18

4. International Flows of Goods, Services, and Capital 20

Figures (Continued)
Summary

Over the past two centuries, improvements in nutrition, sanitation, and health care have dramatically reduced infant mortality and extended the life expectancy 

of children and adults throughout the world. With more 

women reaching childbearing age, the world has experienced a period of rapid and sustained population growth, 

with the global population nearly quadrupling during the 

20th century. As populations grow and incomes rise, 

however, succeeding generations are gradually reducing 

the number of children they have. The global population 

is therefore expected to increase only by another 50 percent or so before stabilizing over the next century. Thus, 

the world is moving from a pattern of high birth rates, 

high mortality, and relatively short life expectancy to one 

of low birth rates, low mortality, and long life expectancy—and from high rates of population growth to 

much lower rates and even, ultimately, to a stable or even 

declining population. That demographic transition has 

far-reaching economic implications for societies throughout the world.

Each country’s demographic transition typically involves 

several major phases whose duration depends on the timing and pace of changes in mortality and fertility.

B Initially, as infant mortality declines and population 

growth takes off, the country’s population tends to 

grow younger, and the youth share of the population 

expands. The burden of raising large numbers of children tends to restrain other types of saving and investment and thus tends to restrain economic growth.

B Later, as birth rates decline, the youth share of the 

population contracts and the working-age share expands. With fewer children to care for, the adult population can work, save, and invest more, all of which 

tend to enhance economic growth. When the workforce is relatively young, the country is likely to have 

relatively low saving and relatively high demand for 

investment—and therefore relatively high rates of return. However, as a large portion of the labor force 

reaches middle age, saving may rise and the demand 

for investment may fall, a phenomenon that tends to 

reduce rates of return.

B Still later, however, as birth rates remain low and 

adults continue to live longer, the elderly share of the 

country’s population rises. As a result, working-age 

adults may not have as many children to raise, but 

they have many more old (and increasingly older) people to support and care for. In addition, the rate of 

saving may decline as retirees run down their savings—although that effect does not appear to be as 

strong as one might expect on the basis of economic 

reasoning alone.

Other developments—for example, political, economic, 

or environmental disruptions and post-war “baby 

booms”—can change the age structure of a country’s population in similar ways as well.

A further complication is that the transition is occurring 

at different times and at different paces in different parts 

of the world. Only the industrialized countries—which 

currently account for roughly 20 percent of the global 

population but about 80 percent of gross world product—and a few developing ones have reached the advanced stages. Over the next 50 years, those countries will 

generally see their population growth rates fall (and in 

some cases turn negative) and their elderly populations 

expand. With the growth of their working-age populations declining sharply, developed countries will find it 

increasingly expensive to support growing numbers of retirees, who will place increasing stress on those countries’ 

largely “pay-as-you-go” pension systems and health care 

systems.

In contrast, many developing countries—which already 

account for roughly 80 percent of the world’s population 

but only about 20 percent of its output—have only recently entered the transition. Their birth rates and population growth rates are expected to remain relatively high 

over the next half-century; their populations will remain 

relatively young—and in some of the least-developed 

countries, very young—and their working-age populations will expand. The difference in patterns between developed and developing countries is shifting the global 

distribution of the population, as developing regions with 

the youngest populations account for a growing share of 
viii GLOBAL POPULATION AGING IN THE 21ST CENTURY AND ITS ECONOMIC IMPLICATIONS

the world’s population. Only in the second half of this 

century and beyond are many of the developing countries—and thus the world as a whole—likely to experience the full transition. 

No country is likely to be immune from the effects of the 

transition in other countries and regions. Demographic 

differences probably will influence the kinds of products 

different countries produce, how they produce them—

for instance, with more or less labor or capital—and 

which products they import or export. International differences in the timing and pace of the transition also are 

likely to make it attractive for workers to move from 

countries with relatively large supplies of labor to countries with relatively high demand for it. Moreover, differences in timing are likely to raise saving more than investment in some countries while raising investment more 

than saving in others. Investors are likely to respond by 

moving financial capital from countries with high saving 

relative to investment to countries with high investment 

relative to saving.

Researchers find it very difficult, however, to distinguish 

the influence of demographic trends from the many other 

influences that can drive international flows. Nevertheless, experts believe that developing regions are very likely 

to be an ongoing source of potential immigration to developed countries. And although capital has tended to 

flow from developed countries to developing ones in the 

past, it may well be the case that the direction of flows 

will reverse after the developed countries have entered a 

period of rapid aging and developing countries have begun to reap the benefits of declining fertility and rapid 

growth in their working-age shares.

Policy developments in developed and developing countries alike could greatly influence the effects of the demographic transition. For example, the effect of a rapidly expanding workforce on economic growth may be enhanced in developing countries by deliberate investment 

in education, by the development of flexible financial 

markets to channel savings to productive uses, and by 

openness to trade. Policies that encourage adequate retirement preparation could help rapidly aging developed 

countries prepare for a growing elderly population, 

whereas the effects of aging could be exacerbated by pension programs that discourage private saving or continued part-time work in retirement or that encourage relatively early retirement.

The United States’ transition is somewhat unusual because the nation has a higher birth rate than most other 

developed countries and also is more open to immigrants, 

who tend to have more children than do natives. Immigration and relatively high overall birth rates will probably prolong the nation’s transition and render it less disruptive than that of many other countries. In addition, 

the United States has highly developed and open financial markets that should allow capital to move across borders to its most profitable uses, wherever they may be. 

However, immigration is unlikely to greatly offset the 

stresses of aging in the United States and other developed 

countries or the stresses of population growth in the developing ones.

Any specific projection of global, regional, and national 

population trends must be based on uncertain assumptions about birth rates, life expectancy, and population 

movements among countries and is therefore subject to a 

good deal of uncertainty. For example, in its “medium 

variant” projection, the United Nations assumes that the 

low current birth rates in developed countries will gradually rebound, thus preventing their populations from 

dwindling away (United Nations, 2005). The United Nations also assumes that, taking the developed countries as 

a whole, average life expectancy will not rise above 85 

years during the next half-century, an assumption that 

limits the extent to which longer life spans can contribute 

to population growth and to burgeoning elderly populations. However, demographers have tended to underestimate declines in fertility and improvements in life expectancy. Analysis and experience provide little guidance 

about the level at which birth rates will ultimately stabilize, leading some to question the likelihood of any such 

rebound. Similarly, technological breakthroughs and new 

applications of existing technologies could push life expectancy well above the United Nations’ currently projected trend. At the same time, however, unexpected developments—disease, war, or environmental problems—

could lead to higher mortality rates than projected in the 

medium variant.

Probabilistic projections of future population growth that 

explicitly incorporate a range of assumptions about birth 

rates and life expectancy suggest that the official population projections could substantially understate or overstate the extent of population aging over the next 50 

years. Nevertheless, there is little doubt about the general 

trends described above and the general economic effects 

that are likely to result from them.
Global Population Aging in the

21st Century and Its Economic Implications

Introduction

The world is undergoing a centuries-long demographic 

transition that, when complete, will leave the global population larger and much older, on average, than it is today. The transition was triggered mainly by improvements in nutrition, sanitation, health practices, and 

medical care that have dramatically reduced infant mortality and extended the life expectancy of children and 

adults. With more children living to adulthood and having children themselves, the world is going through an 

unparalleled period of rapid and sustained growth in 

population. As population and incomes have grown, 

however, people have begun to reduce the number of 

children they have. The resulting decline in fertility rates 

is gradually reducing the rate of population growth, and 

the world population is gradually becoming older.

The timing and pace of the transition vary considerably 

across regions and countries of the world. Fertility rates 

have fallen nearly everywhere, but while they have generally fallen to lower levels in developed countries than in 

most developing countries, they are falling more rapidly 

in the developing countries. Similarly, life expectancies 

have risen to higher levels in developed countries than in 

developing ones and will remain higher for many years to 

come, but life expectancies have risen nearly everywhere 

and are currently rising more rapidly in most developing 

countries. (In a few regions, however, life expectancy has 

actually declined—as a result of HIV/AIDS in parts of 

Sub-Saharan Africa and of disruptions associated with 

political and economic transitions in parts of the former 

Soviet bloc.) In addition, immigration from developing 

countries has contributed to population growth in some 

developed countries—including the United States—

although most other developed countries have allowed 

relatively little immigration.

The net result of those trends is that population growth 

rates are currently much higher in most developing countries than in developed ones, but growth rates are gradually declining nearly everywhere. Many developed countries that are already well into the transition have nearly 

stable or even declining populations that are rapidly aging. In contrast, many developing countries will continue 

to have much younger and rapidly growing populations 

for several decades to come. The differences across regions are likely to have significant effects on international 

economic trends.

Significant uncertainties exist in the timing and magnitude of the demographic transition and the shifts in population structure—and how those developments will affect national economies throughout the world and the 

international economic flows among them. Some experts 

see little reason for concern, noting that the process has 

generally been associated with gains in health, income, 

and welfare; others worry about slowing rates of economic growth, stress on national pension systems, and 

imbalances in international financial markets.

This review describes the main trends that have produced 

the current global and regional population distribution 

and discusses the most prominent projections of future 

population in the literature. In addition, the paper presents an overview of the current state of knowledge about 

how those population trends are likely to affect international economic developments over the long term.

Sources of the Demographic 

Transition

Population aging is a global phenomenon in the sense 

that nearly all countries are undergoing a demographic 

transition that is likely to leave them, in time, with larger 

and much older populations than they started with.1

That transition has followed the same general pattern

everywhere, with relatively distinct phases involving 

changes in fertility (the number of children women have) 

and mortality (the rate at which people die). Those pat1. For a general introduction to population history, see Livi-Bacci 

(2001).
2 GLOBAL POPULATION AGING IN THE 21ST CENTURY AND ITS ECONOMIC IMPLICATIONS

terns of change also produce a degree of momentum: a 

generation that has a lot of children will also tend to have 

a lot of grandchildren, so that a surge in population generally continues over a few generations even if mortality 

rates stabilize and fertility falls dramatically.

However, the transition is not uniform: different countries and regions entered it at different times, are currently in different phases of the process, and are going 

through those phases at different rates.2

 The timing and 

pace of changes in rates of mortality and fertility can be 

expected to vary from region to region in the future as 

well. Moreover, migration from one region to another reduces population growth in the source region and increases it at the destination.

Mortality and Life Expectancy

Before the demographic transition began, fertility and 

mortality were both high throughout the world: many 

children died in infancy, and people who reached adulthood tended to have many children and die relatively 

young. Famines and epidemics could quickly and unpredictably kill many people, causing large fluctuations in 

rates of mortality. As a consequence, most people were 

young, and very few lived to old age.

That pattern first began to change in Europe in the 1700s 

as improvements in living standards led to a decline in 

the death toll from plagues and famines and to less dramatic fluctuations in mortality (National Research Council, 2000). A second stage, during the 1800s, involved 

continued improvements in living standards and sanitation, leading to a gradual decline in mortality rates and a 

rise in average life expectancy, mainly in Europe and in 

regions (such as America) settled by Europeans. A third 

stage began around 1900, after which medical advances 

contributed to a rapid decline in mortality rates, especially in infant mortality. As a result, life expectancy at 

birth rose by roughly one-third of a year per year for 

much of the 20th century.3

 Finally, in a fourth stage that 

began around 1960, further medical advances have reduced mortality among the elderly, leading to improvements in life expectancy for those who have already 

reached advanced ages.4 At present, people born today in 

most of the developed countries can expect to live well 

into their mid-70s or longer if current mortality rates prevail and even longer if those rates continue to fall. Life expectancy at birth in those countries is therefore projected 

to continuously rise well into the future (see Figure 1).5

The rest of the world has generally followed the same 

phases as the developed countries, but the timing has varied considerably, and as developing countries have 

adopted new technologies and habits, the phases have 

typically occurred increasingly rapidly. Much of Latin 

America and a number of other countries in other parts 

of the world began the transition in the first half of the 

20th century and are now in the fourth stage of mortality 

reduction. For most of the developing world, though, the 

transition began around World War II and is now in its 

third stage. However, China and a few other developing 

countries have experienced very rapid improvements in 

life expectancy and are not far behind the developed 

countries. In contrast, the transition began later and has 

progressed more slowly in the countries designated by the 

United Nations as “least developed”—much of SubSaharan Africa, a few countries in southern and southeastern Asia, and a handful of other countries. For some 

countries, progress has even been significantly reversed by 

the HIV/AIDS epidemic.6

 (Life expectancy has also declined in some developed countries of the former Soviet 

bloc since its collapse in the early 1990s.)

2. See Cohen (1995) and O’Neill and Balk (2001).

3. Life expectancy at birth is the number of years newborn infants 

will live, on average, if prevailing patterns of mortality at the time 

of their births stay the same throughout their lives. That measure 

is also referred to as “period” life expectancy because it depends on 

mortality rates in a particular period. A different measure, 

“cohort” life expectancy, calculates the number of years that newborn infants will live, on average, if mortality rates continue to 

improve as projected. See Social Security Administration (2005), 

pp. 78-79, for additional details.

4. The stages of improvement in mortality are discussed in National 

Research Council (2000), pp. 117-127. 

5. The developed countries include those of Europe and North 

America, as well as Australia, New Zealand, and Japan. (Life 

expectancy in the United States is higher than the average for 

other developed countries but is lower than that of many.) The 

developing countries include those classified by the United 

Nations as “less developed” and “least developed.” See 

Appendix B for a complete listing.

6. Of the 60 countries with the largest numbers of people living with 

HIV, 34 are in Africa, where more than two-thirds of the people 

infected reside. The remaining countries are in Latin America and 

the Caribbean (10), Asia (nine), Europe (five), and North America 

(two). Data available at www.un.org/esa/population/publications/

POP_HIVAIDS2005/POP_HIVAIDS.htm. 
GLOBAL POPULATION AGING IN THE 21ST CENTURY AND ITS ECONOMIC IMPLICATIONS 3

Figure 1.

Life Expectancy at Birth, 1950 to 2050

(Years of life expected)

Source: United Nations, World Population Prospects, 2004 Revision.

Declining mortality and rising life expectancy represent 

an extraordinary improvement in human welfare. For the 

world as a whole, life expectancy at birth rose from under 

30 years in 1900 to about 65 years in 2000 and, according to one fairly typical projection, may rise to 81 years 

by 2100 (Lee, 2003). Life expectancy for women in the 

record-holding country (which has changed over time) 

has risen steadily at about three months per year for 160 

years—from 45 years in Sweden in 1840 to 85 years in 

Japan in 2000 (Oeppen and Vaupel, 2002). One expert 

estimates that over the course of the 20th century, increasing life expectancy contributed as much to human 

welfare as did rising levels of consumption (Nordhaus, 

2003). Moreover, the medical advances and other improvements in living conditions that have helped extend 

people’s lives have also made those additional years of life 

healthier (Mathers and others, 2001).

In developed countries, improvements in public health 

have reduced mortality among children and young people to such an extent that future improvements in life expectancy in those countries will come largely from advances that reduce mortality among old people. As a 

result, life expectancy at older ages is likely to grow more 

rapidly than life expectancy at birth. In developing countries where infant mortality is still significant, life expectancies at birth and at advanced ages are projected to continue rising, gradually converging with expectancies in 

developed countries. However, according to standard 

projections by the United Nations, life expectancy will 

still be lower in the least-developed countries in 2050 

than it was in the United States in 1950.

Fertility

Fertility rates began to decline in many advanced countries during the 1800s, typically—but not invariably—after mortality rates had already begun to fall.7 In many of 

those countries, fertility rates fell to replacement levels—

that is, levels that would keep the population roughly

 1950-

1955

 1960-

1965

 1970-

1975

 1980-

1985

 1990-

1995

 2000-

2005

 2010-

2015

 2020-

2025

 2030-

2035

 2040-

2045

0

30

40

50

60

70

80

90

United States

More-Developed Countries

(Including United States)

China

Less-Developed Countries

(Excluding China)

Least-Developed Countries

Historical Estimates Projections (Medium Variant)

7. Fertility rates are typically measured by the total fertility rate, 

which measures the average number of children each woman 

would have if the age-specific fertility rates in her region or country in a given year remained unchanged over her expected lifetime 

(Census Bureau, 2004, Appendix E). For additional details, see 

www.census.gov/ipc/prod/wp02/appE.pdf.
4 GLOBAL POPULATION AGING IN THE 21ST CENTURY AND ITS ECONOMIC IMPLICATIONS

Figure 2.

Total Fertility Rates, 1950 to 2050

(Births per woman)

Source: United Nations, World Population Prospects, 2004 Revision.

constant over time—before World War II.8 (Prior to the 

transition, fertility rates appear to have been typically on 

the order of five or more children per woman.)

Many developed countries experienced a burst of fertility 

following World War II—the United States’ baby boom 

is a notable example—but have seen fertility levels fall to 

replacement levels or lower since then. Part of the decline 

in fertility rates is probably temporary, caused by women 

delaying having children until they are older. (That temporary fall in the fertility rate is referred to as the “tempo 

effect.”) As the average childbearing age stabilizes, fertility 

should rise slightly—on the order of 0.2 children per 

woman—but in many countries, it is not clear whether 

fertility will rise back to replacement levels, stabilize at 

some other level, or stabilize at different levels in different 

countries (Bongaarts, 2001; and Demeny, 1997).

Fertility has remained higher in the United States than in 

most developed countries. Among the developed countries, only the United States currently has a fertility rate 

that is very near replacement levels, but many projections 

call for it to fall below replacement over the next decade 

(see Figure 2).9

In developing countries, the fertility transition started 

later but often proceeded much more rapidly than demographers expected on the basis of developed countries’ 

experience at similar levels of development. Trends in total fertility also are considerably more varied among developing countries. In Latin American and Asian countries, fertility rates have fallen from around six births per 

woman in 1960 to fewer than three and are still declining 

(National Research Council, 2000, p. 56). Fertility has 

 1950-

1955

 1960-

1965

 1970-

1975

 1980-

1985

 1990-

1995

 2000-

2005

 2010-

2015

 2020-

2025

 2030-

2035

 2040-

2045

0

1

2

3

4

5

6

7

8

United States

More-Developed Countries

(Including United States)

China

Less-Developed Countries

(Excluding China)

Least-Developed Countries

Historical Estimates Projections (Medium Variant)

8. See Demeny (1997). A country’s replacement level of fertility 

depends in part on its mortality rates and on the ratio of men to 

women in the population. In developed countries today, the 

replacement level is generally about 2.1 children per woman.

9. For its intermediate case, the Social Security Administration 

projects a long-term fertility rate in the United States of 1.95 children per woman. (It also projects a high-fertility case of 2.2 children per woman and a low-fertility case of 1.7.) See Social 

Security Administration (2005), p. 6. The Census Bureau, however, projects a rate of 2.2 children per woman (Hollman, Mulder, 

and Kallan, 2000, p. 25).
GLOBAL POPULATION AGING IN THE 21ST CENTURY AND ITS ECONOMIC IMPLICATIONS 5

fallen especially sharply in China, where the government 

long attempted to control the number of children per 

couple; in the most rapidly industrializing countries of 

East Asia; and in a few other countries as well.10 In the 

Middle East, in contrast, fertility rates have declined 

somewhat more slowly, and in Sub-Saharan Africa, they 

began to decline only in the 1980s and remain quite 

high. Nevertheless, fertility rates are projected to fall below 3.0 children per woman everywhere before 2040 and 

to gradually converge to something approximating replacement levels (see Figure 2). For the world as a whole, 

the total fertility rate dropped from five children per 

woman in 1950 to 2.7 in 2000 and is projected to fall to 

about 2.1 by 2050.

In nearly all regions, the bulk of the fertility transition has 

occurred or is expected to occur over a few generations at 

most. The decline in fertility rates largely results from 

people consciously choosing to have fewer children, but 

the motivations for that shift are not well understood. 

The conventional explanation is that parents may find it 

more beneficial to invest more resources in each child, 

raising a few well-educated children rather than raising a 

greater number of children with less education. According to that explanation, declining mortality makes each 

child more likely to survive to adulthood; economic 

growth allows children to be more productive over longer 

lives (and thus better able to care for elderly parents); and 

the time required to raise children becomes more costly 

in terms of forgone income. The evidence is somewhat 

mixed, however, in that the experiences of different countries are quite variable. In some cases, very poor countries 

have experienced much more rapid declines in fertility 

than the conventional explanation or historical trends 

would imply (Bloom and Canning, 2004a; and National 

Research Council, 2000, pp. 58-59). That evidence suggests that social traditions and norms, as well as the availability of contraception, also play a role in determining 

fertility. Other evidence suggests that increasing education, especially for women, tends to contribute to declines in fertility rates (Bongaarts, 2003).

Momentum

Once declines in mortality yield a large population of 

young people who can be expected to live into adulthood 

and have children, a country almost certainly will experience further population growth (National Research 

Council, 2000, p. 27). If a decline in infant mortality 

leads to a substantial increase in the number of children 

who live to adulthood—and hence an increase in the 

population—that second generation is likely to produce 

another generation of children that is at least as large as 

the second and that is much larger than the first. Thus, 

even if mortality rates stabilize and fertility falls dramatically, the age structure of the population—that is, the distribution of the population according to age—will ensure 

that growth continues for a period of time as large, young 

cohorts replace smaller, older ones. Conversely, if a country’s fertility levels decline below replacement levels and 

the population becomes sufficiently old, the same phenomenon can contribute to declines in population rather 

than to growth. Although that phenomenon—referred to 

as “momentum”—is not a fundamental cause of the demographic transition in the same sense that changes in 

mortality and fertility are, it is an important element in 

understanding how those changes translate into population growth and changes in the age structure.

Roughly two-thirds of the projected growth in global 

population over the next 50 years is expected to be the

result of momentum. In the developed countries as a 

whole, however, momentum will actually lead to lower 

population as smaller generations with low fertility rates 

fail to fully replace themselves (National Research Council, 2000).

Migration

Migration between countries can significantly affect the 

growth rates of the source and destination countries. 

During the 19th century, migration tended to moderate 

population growth in European countries and augment it 

in others—the United States being a notable example. 

Migrants, moreover, tend to be relatively young and, at 

least in the United States over the past three decades, have 

tended to have more children than do natives (Kahn, 

1994). Migration can thus play a significant role in the 

timing and pace of a country’s demographic transition.

The Phases of the Transition

Despite variations in their timing and pace, the demographic forces discussed above have generated a similar 

pattern of demographic change in every region of the 

world.

10. For further discussions, see Census Bureau (2004); Bongaarts 

(2001); Freedman and others (1994); Jackson (2002); and Jackson 

and Howe (2004).
6 GLOBAL POPULATION AGING IN THE 21ST CENTURY AND ITS ECONOMIC IMPLICATIONS

B Initially, prior to the transition, rates of mortality and 

fertility are both high, and the population is relatively 

young.

B As the transition begins, mortality rates decline—particularly infant mortality—and life expectancies begin 

to rise. Because fertility rates remain high, the population begins to expand. The population typically becomes younger on average, and youth dependency—

the number of children supported by the average 

working-age adult—increases.

B As time passes, people begin to reduce the number of 

children they have; fertility rates begin to decline, and 

the rate of population growth slows—although momentum may cause the absolute increase in the number of people to continue to rise for a time. With 

proportionately fewer children being born and the 

continuing improvements in life expectancy, the population begins to get older. Youth dependency begins 

to fall, and the share of the population that is of working and saving age expands—a development referred 

to as the “demographic dividend” because it allows for 

greater economic output per capita.

B As more time passes and an increasing portion of the 

population enters retirement, the old-age dependency 

ratio—the number of old people supported by the average working-age adult—tends to rise.

B Ultimately, rates of mortality and fertility both reach 

low levels. Fertility may even decline below its longrun level as women postpone childbearing. The population may become considerably older, and population 

growth stabilizes or may even turn negative. Old-age 

dependency may continue to grow for many years, especially if life expectancy continues to rise.

Appendix A provides an illustrative example of the phases 

of the transition.

Past and Projected Population Trends

The best available estimates indicate that global population rose from about 1 billion in 1800 to 1.6 billion in 

1900, 2.5 billion in 1950, and just under 6.1 billion people in 2000.11 The population growth rate peaked at just 

over 2 percent per year in the early 1960s and is now 

growing at just over 1 percent per year. The single largest 

annual increase—about 88 million people—occurred 

around 1989; the current annual increment is about 74 

million per year—the difference between 130 million 

births and 56 million deaths and the equivalent of about 

one-quarter of the U.S. population (see Figure 3).12

Projections

Projections typically call for fertility rates to continue to 

fall in all regions, for life expectancies to continue to rise, 

and for the global population to continue to grow but at 

a declining rate (see Box 1). If those trends continue as 

expected in the most widely cited standard projection, 

the United Nations’ “medium variant,” the global population will rise to about 9.1 billion people in 2050 and 

will stabilize near that value over the following 50 years 

(see Figures 1 and 2 on pages 3 and 4 and Figure 4 for details from that projection).13 Nearly all of the growth is 

projected to occur in countries currently classified as “less 

developed,” whose share of the global population will rise 

from roughly 81 percent to 86 percent. Although the 

U.S. population is expected to grow to about 395 million 

by 2050—about one-third larger than at present—the 

rest of the developed countries, taken together, are likely 

to experience a population decline.

Assumptions about future migration, which is more uncertain than many other elements of the population projections, generally project future levels of migration to be 

similar to current levels. Under such assumptions, migration alone will account for about half of U.S. growth between now and 2050, while migration to other developed 

countries will offset about 45 percent of the decline in 

their populations that would occur in its absence.14 The 

projected levels of migration, however, would have relatively little effect on future population levels in the source 

countries in developing regions.

11. The U.S. Census Bureau provides estimates of historical population through 1950 at www.census.gov/ipc/www/worldhis.html 

and estimates for 1950 and later at www.census.gov/ipc/www/

worldpop.html. 

12. Data from the Census Bureau’s International Data Base, available 

at www.census.gov/cgi-bin/ipc/pcwe. The decline in population 

growth in 1958-1962 is due to the famine caused by the Great 

Leap Forward policy in China. See Yao (1999).

13. United Nations (2005 and 2004b).

14. The United Nations’ medium-variant projections of migration to 

the United States are quite similar to those of the Census Bureau. 

The Social Security Administration’s projections are somewhat 

lower.
GLOBAL POPULATION AGING IN THE 21ST CENTURY AND ITS ECONOMIC IMPLICATIONS 7

Figure 3.

World Population Growth, 1950 to 2005

(Millions) (Growth rate)

Source: Census Bureau, International Data Base.

Note: For both series, values show change from July 1 of the previous year to July 1 of the indicated year.

Figure 4.

Population, 1950 to 2050

(Billions)

Source: United Nations, World Population Prospects, 2004 Revision.

1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005

0

20

40

60

80

100

0

0.5

1

1.5

2

2.5

Annual Rate of Growth

(Right scale) Annual Increase

(Left scale)

1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050

0

1

2

3

4

5

United States

More-Developed Countries

(Excluding United States)

China

Less-Developed Countries

(Excluding China and Least-Developed)

Least-Developed

Countries

Historical Estimates Projections (Medium Variant)
8 GLOBAL POPULATION AGING IN THE 21ST CENTURY AND ITS ECONOMIC IMPLICATIONS

The global population is also projected to grow noticeably older. Under the assumptions of the medium-variant 

projection, for example, the share of the global population that is generally considered of working age (ages 18 

to 64) will remain fairly steady over the next 50 years, 

whereas the share that is under age 18 will fall from about 

34 percent to about 24 percent, and the share that is 65 

and older will rise from about 7 percent to more than 16 

percent.

Those global averages, however, mask significant differences among regional projections. In general, developed 

countries—as well as China and a handful of other developing countries—are likely to become much older, experiencing declines in their youth and working-age shares 

and significant increases in their elderly shares. In the 

United States, for example, the youth and working-age 

shares are projected to decline by about 4 percentage 

points each, whereas the elderly share will rise by about 8 

percentage points. Those trends will raise the old-age dependency ratio from about 20 percent today—that is, 

about five people of working age to each old person—to 

more than 35 percent by 2050—that is, about 3 to 1 (see 

Figures 5 and 6. 15

In the rest of the developed countries as a whole, the 

youth share—which is already quite low—is projected to 

decline by only about 2 percentage points, but the working-age share falls by more than 10 points, and the elderly 

Box 1.

Sources of Population Projections

A number of official statistical agencies and private 

organizations publish projections of future population trends, using data from country-specific population censuses combined with assumptions about future trends in total fertility, life expectancy, and net 

migration (National Research Council, 2000, Chapter 1). Two organizations regularly issue detailed 

population projections for all countries: the International Programs Center (IPC) of the United States 

Census Bureau (Census Bureau, 2005) and the 

United Nations (United Nations, 2005). Both the 

IPC and the United Nations have recently released 

updated population projections through 2050.1 Of 

the two organizations, the United Nations’ projections are the most widely cited. Several other organizations also produce useful projections that provide 

additional perspective on population trends.2

Even though the IPC’s and the United Nations’ projections incorporate somewhat different base population estimates, as well as different fertility, mortality, 

and migration assumptions, they are quite similar at 

the global level—differing by less than 2 percent in 

2050—and broadly so at the regional level. Both organizations’ estimates project rising life expectancies, 

declining fertility rates, slowing population growth, 

and significant population aging. However, the two 

projections’ estimates of country-specific population 

can differ rather substantially: for instance, their projections for U.S. population in 2050 differ by more 

than 6 percent, or about 25 million people. (For purposes of illustration, this paper relies largely on the 

United Nations’ population estimates and projections, mainly because the organization publishes several variations that illustrate some of the uncertainty 

surrounding its central projection. However, that 

choice should not be considered as reflecting greater 

accuracy or reliability of either set of projections over 

the other.)

1. The United Nations also periodically releases longer-term 

projections, the most recent providing estimates to 2300 

(United Nations, 2004b).

2. The World Bank publishes global population projections 

extending through 2050 (World Bank, 2004). The International Institute for Applied Systems Analysis (IIASA; Lutz, 

Sanderson, and Scherbov, 2004) produces probabilistic population projections extending through 2100. World Bank 

projections are used mainly for planning and project management, whereas IIASA’s projections are used primarily to 

assess projection assumptions and methods (Ashford, 2001).

15. The notion of old-age dependency described here is somewhat 

arbitrary in that improvements in health care and living standards 

have generally increased the capacity of older people both to work 

and to enjoy leisure.
GLOBAL POPULATION AGING IN THE 21ST CENTURY AND ITS ECONOMIC IMPLICATIONS 9

Figure 5.

Youth Dependency Ratios, 1950 to 2050

(Population ages 17 and younger as a percentage of population ages 18 to 64)

Source: United Nations, World Population Prospects, 2004 Revision.

Figure 6.

Old-Age Dependency Ratios, 1950 to 2050

(Ratio of population ages 65 and older to population ages 18 to 64)

Source: United Nations, World Population Prospects, 2004 Revision.

1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050

0

20

40

60

80

100

120

United States

More-Developed Countries

(Excluding United States)

China

Less-Developed Countries

(Excluding China and

Least-Developed)

Least-Developed

Countries

Historical Estimates Projections (Medium Variant)

1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050

0

10

20

30

40

50

60

United States

More-Developed Countries

(Excluding United States)

China

Less-Developed Countries

(Excluding China and

Least-Developed)

Least-Developed

Countries

Historical Estimates Projections (Medium Variant)
10 GLOBAL POPULATION AGING IN THE 21ST CENTURY AND ITS ECONOMIC IMPLICATIONS

share rises by 12 points. Those changes will raise the region’s old-age dependency ratio from about 25 percent 

today (four working-age people to each old person) to 

about 53 percent (less than 2 to 1). And China faces an 

even more dramatic change: its youth and working-age 

shares decline by about 8 percentage points each, whereas 

the elderly share rises by about 16 points. By 2050, according to those projections, China will have an even 

older population than will the United States. Although 

there are about nine people of working age for every old 

person in China today, by 2050, the ratio will be 2.5 to 1 

(see Box 2 for a comparison of China’s and India’s population prospects).

Other developing countries, in contrast, will typically experience dramatic declines in their youth shares coupled 

with increases in their working-age and elderly shares, according to the medium-variant projection. For the “lessdeveloped” countries, a nearly 15 percentage-point decline in the youth share is projected to be offset by a 5 

percentage-point increase in the working-age share and a 

10 percentage-point increase in the elderly share. For the 

“least-developed” countries, most of the decline in the 

youth share will be offset by an increase in the workingage share. Those countries, therefore, face the prospect of 

a significant “demographic dividend”—an increase in potentially productive labor that is not needed to support 

children and old people—before their populations begin 

to experience the dramatic aging that is already beginning 

to affect the developed countries.

Historical and projected population pyramids for the 

world as a whole and for specific countries and regions illustrate the aging of the populations of the United States, 

other developed countries, and China, as well as the very 

Box 2.

Fertility Rates in China and India

The contrasting experiences of China and India vividly illustrate how differences in fertility rates result 

in dramatic differences in countries’ population 

structures. During the 1960s, China had about 50 

percent more people than India and had already 

achieved a considerably higher life expectancy—

about 55 years versus 47 years. However, they were 

very similar in a number of important ways: both 

countries’ fertility rates were extremely high (5.9 and 

5.8 children per woman, respectively); their populations were growing at nearly the same annual rate—

2.4 percent versus 2.3 percent; and with children 

ages 17 and younger making up about 45 percent of 

each’s population, both countries faced an extended 

period of rapid population growth. (See the figure to 

the right.)

Deeply concerned with the prospect of rapid population growth, the Chinese government instituted a 

policy during the late 1970s largely limiting couples 

to only one child. That policy contributed to a dramatic reduction in fertility rates: by the late 1990s, 

China’s rate had fallen to under 1.8 children per 

woman, only about half as large as India’s rate of 3.4. 

As a consequence, China’s annual rate of population 

growth fell to under 1 percent during the 1990s 

while India’s remained near 2 percent; and by 2000,

Fertility Rates, 1950 to 2050

(Children per woman)

Source: United Nations, World Population Prospects, 2004

Revision.

Note: Values apply to five-year increments beginning in 

1950.

0

1

2

3

4

5

6

7

India

China

Historical Estimates Projections

(Medium

Variant)

1950-

1955

1965-

1970

1980-

1985

1995-

2000

2010-

2015

2025-

2030

2040-

2045
GLOBAL POPULATION AGING IN THE 21ST CENTURY AND ITS ECONOMIC IMPLICATIONS 11

rapid growth and large youth and working-age shares of 

other developing countries (see Figure 7 on page 12).

Uncertainty in Projections

The projections discussed above are generally point estimates based on sets of specific assumptions about trends 

in fertility, mortality, and migration. Because those trends 

can be forecast only with a significant degree of uncertainty—uncertainty that increases dramatically the longer 

into the future the forecast goes—the projected estimates 

of population and age structure are necessarily uncertain 

as well.

Past Errors. Past population projections may help provide a sense of the range of uncertainty. Almost all of the 

various projections of world population in 2000 that 

were carried out after 1950 turned out to be off by less 

than 4 percent. However, projections for specific countries were off by much more—by about 5 percent on average for five-year projections and 17 percent for 30-year 

projections. (Researchers made significant advances in developing projection techniques in the 1950s and 1960s 

but have made relatively few technical improvements 

since then.)

Two sets of assumptions have contributed most significantly to past forecast errors. First, researchers have consistently underestimated how rapidly fertility and birth 

rates would decline—particularly in developing countries. Second, they have consistently overestimated mortality rates and thus failed to anticipate how rapidly life 

expectancies would improve, particularly for the elderly. 

Those errors have resulted in overestimates in the projected number of young people and underestimates in the 

number of old people.

Box 2.

Continued

children ages 17 and younger made up less than 30 

percent of China’s population while comprising 

more than 40 percent of India’s. At the same time, 

working-age people made up a much larger share of 

China’s population than India’s—nearly 9 percentage 

points larger. The country’s fertility decline was paying off in a demographic dividend as more people 

with fewer children to raise had more time to work.

The consequences for China of that rapid drop in 

fertility rates, combined with rising life expectancies, 

are very likely to unfold over several generations. According to the United Nations’ projections, India’s 

burgeoning population will overtake China’s by 

about 2030, when each country will have nearly 1.5 

billion people and when the working-age share in 

each will be about 63 percent. However, children 

will make up a much smaller share (and old people a 

much larger share) of China’s population than India’s, and it will be India that experiences enhanced 

growth in per capita output because of demographic 

factors. By 2050, the elderly will comprise nearly 24 

percent of China’s shrinking population but less than 

15 percent of India’s still-growing one. (See the figure below.)

Population Ages 65 and Older, 1950 to 2050

(Percent of total population)

Source: United Nations, World Population Prospects, 2004

Revision.

1950 1965 1980 1995 2010 2025 2040

0

5

10

15

20

25

India

China

Historical Estimates Projections

(Medium

Variant)
12 GLOBAL POPULATION AGING IN THE 21ST CENTURY AND ITS ECONOMIC IMPLICATIONS

Figure 7.

Population Structure During the Demographic Transition

(Age)

Source: United Nations, World Population Prospects, 2004 Revision.

Note: Projections for 2050 are taken from the United Nations’ Medium Variant.

0 100 200 300 400

20

40

60

80

100

400 300 200 100 0

Male Female

Millions

World

1950

0 100 200 300 400

20

40

60

80

100

400 300 200 100 0

Male Female

Millions

2000

0 100 200 300 400

20

40

60

80

100

400 300 200 100 0

Male Female

Millions

2050

0 5 10 15

20

40

60

80

100

15 10 5 0

Male Female

Millions

United States

1950

0 5 10 15

20

40

60

80

100

15 10 5 0

Male Female

Millions

2000

0 5 10 15

20

40

60

80

100

15 10 5 0

Male Female

Millions

2050
GLOBAL POPULATION AGING IN THE 21ST CENTURY AND ITS ECONOMIC IMPLICATIONS 13

Figure 7.

Population Structure During the Demographic Transition (Continued)

(Age)

Source: United Nations, World Population Prospects, 2004 Revision.

Note: Projections for 2050 are taken from the United Nations’ Medium Variant.

0 10 20 30 40

20

40

60

80

100

40 30 20 10 0

Male Female

Millions

Other Developed Countries

1950

0 10 20 30 40

20

40

60

80

100

40 30 20 10 0

Male Female

Millions

2000

0 10 20 30 40

20

40

60

80

100

40 30 20 10 0

Male Female

Millions

2050

0 15 30 45 60 75

20

40

60

80

100

75 60 45 30 15 0

Male Female

Millions

China

1950

0 15 30 45 60 75

20

40

60

80

100

75 60 45 30 15 0

Male Female

Millions

2000

0 15 30 45 60 75

20

40

60

80

100

75 60 45 30 15 0

Male Female

Millions

2050
14 GLOBAL POPULATION AGING IN THE 21ST CENTURY AND ITS ECONOMIC IMPLICATIONS

Figure 7.

Population Structure During the Demographic Transition (Continued)

(Age)

Source: United Nations, World Population Prospects, 2004 Revision.

Note: Projections for 2050 are taken from the United Nations’ Medium Variant.

0 50 100 150 200

20

40

60

80

100

200 150 100 50 0

Male Female

Millions

Other Less-Developed Countries

1950

0 50 100 150 200

20

40

60

80

100

200 150 100 50 0

Male Female

Millions

2000

0 50 100 150 200

20

40

60

80

100

200 150 100 50 0

Male Female

Millions

2050

0 25 50 75 100

20

40

60

80

100

100 75 50 25 0

Male Female

Millions

Least-Developed Countries

1950

0 25 50 75 100

20

40

60

80

100

100 75 50 25 0

Male Female

Millions

2000

0 25 50 75 100

20

40

60

80

100

100 75 50 25 0

Male Female

Millions

2050
GLOBAL POPULATION AGING IN THE 21ST CENTURY AND ITS ECONOMIC IMPLICATIONS 15

The first mistake tends to lead to overestimates of population levels, whereas the second tends to lead to underestimates. However, the errors resulting from the first have 

been larger than the errors resulting from the second, 

yielding population growth projections that consistently 

have been too high. Both types of mistakes, however, 

have yielded projections of population aging that have 

been consistently too low.16

Mortality. In the past, initial decreases in mortality 

mainly involved improvements in sanitation and nutrition that provided the greatest benefit to young people, 

whereas later decreases involved medical improvements—

such as the treatment of heart disease and cancer—that 

benefited the elderly to a greater degree. Many developing countries are still in the process of providing the basic 

improvements in sanitation and nutrition and are likely 

to see significant reductions in mortality at all ages and 

gradual convergence to levels found in developed countries. Most developed countries, in contrast, have reduced 

mortality at young ages to such an extent that future improvements in life expectancy will largely reflect gains in 

the average years of life enjoyed by the elderly (National 

Research Council, 2000, Chapter 5).

Experts generally conclude that technological improvements, new applications of existing technologies, and 

changes in lifestyles are likely to continue improving life 

expectancies in developed countries, but views differ substantially on how much or how rapidly those improvements might occur.17 For example, in its “intermediate” 

case, the Social Security Administration projects average 

life expectancy at birth in the United States to rise from 

about 77 years in 2000 to 81 years in 2050, whereas the 

United Nations projects it to rise to 83 years and the 

Census Bureau to 84.18 Moreover, the Social Security Administration allows for uncertainty by including a low 

projection of 79 years in 2050 and a high projection of 

84 years, whereas the Census Bureau’s range is from 82 

years to 86 years. Thus, official projections in the United 

States allow for the possibility that life expectancies will 

improve by as little as two years or as much as nine years 

over the first half of the 21st century. At the extreme optimistic end of the range, some experts argue that life expectancies could rise to 100 years or more in at least some 

developed countries over the next century or so (Oeppen 

and Vaupel, 2002).

Whatever may be the potential for improvements in life 

expectancy through reductions in mortality, the potential 

also exists for unexpected shocks—emerging epidemics, 

wars, environmental or social problems, or economic setbacks, for example—to increase mortality and reduce life 

expectancies in one or more countries or regions (Lutz, 

Sanderson, and Scherbov, 2004).19 Demographers never 

expected that life expectancy would decline substantially 

in the former Soviet bloc after its collapse, nor did they 

anticipate the drop induced by HIV/AIDS in Sub-Saharan Africa. Similar developments could offset increases 

in life expectancy resulting from technological improvements and behavioral changes, but their unpredictability 

makes them difficult to incorporate into projections.

Fertility. Although researchers can draw on past trends to 

revise their assumptions about how rapidly fertility rates 

will decline—with current emphasis on the rapidity of 

the decline in developing countries—they have little basis 

for projecting whether different countries’ fertility rates 

will stabilize or not, or at what level or levels they may 

stabilize (Kirk, 1996; Demeny, 1997; Bongaarts, 2002; 

and Lee, 2003). In most developed countries and even in 

some developing ones, total fertility has been well below 

the replacement rate of 2.1 children per woman for some 

time. Such low rates are at least partly the result of 

women delaying childbearing (the tempo effect mentioned earlier), and the completion of the transition

16. National Research Council (2000). The two notable exceptions 

have been the failure to anticipate the drop in life expectancy in 

countries seriously affected by the HIV/AIDS epidemic and in the 

former Soviet bloc.

17. See, for instance, Oeppen and Vaupel (2002); Olshansky, Carnes, 

and Desesquelles (2001); and Tuljapurkar, Li, and Boe (2000).

18. See Social Security Administration (2005), p. 80; Hollmann, 

Mulder, and Kallan (2000), p. 26; and United Nations (2005). 

The projections presented in this paragraph are for period life 

expectancy, which is based on mortality rates in the specified year. 

Cohort life expectancies, which involve mortality rates projected 

over succeeding years, are several years higher because they reflect 

ongoing projected reductions in mortality rates.

19. See Table 5-2 in National Research Council (2000, p. 142) for a 

comprehensive list of post-World War II declines in life expectancy associated with social, political, economic, and epidemiological crises. The bulk of those episodes have taken place in 

countries where life expectancy was less than 55 years. One notable exception is the slow decline in life expectancy in the former 

Soviet Union and in the former Soviet bloc countries preceding 

the collapse of communism.
16 GLOBAL POPULATION AGING IN THE 21ST CENTURY AND ITS ECONOMIC IMPLICATIONS

Figure 8.

Uncertainty in Population Projections

(Billions)

Source: United Nations, World Population Prospects, 2004 Revision; Census Bureau, International Data Base; and Lutz,

Sanderson, and Scherbov, eds. (2004).

Note: IIASA = International Institute for Applied Systems Analysis.

to later childbearing, should it occur, should result in 

somewhat higher total fertility levels. Moreover, surveys 

in developed countries indicate that families want more 

children than they are having (Bongaarts, 2001). Those 

facts raise the possibility of a rebound in fertility rates.

Other considerations, however, suggest that fertility rates 

may not rebound a great deal: contraceptive technologies 

have improved and have fallen in cost; marriage rates 

have declined in many countries while divorce rates have 

risen; women have devoted increasing resources to education and careers, raising the opportunity costs of having 

children; and the relative costs of child care and education have also risen (Lutz, Sanderson, and Scherbov, 

2004; and United Nations, 2004). Such considerations 

suggest that fertility rates may remain below replacement 

levels indefinitely in many countries (Frejka and Calot, 

2001).

Uncertainty about fertility levels also affects projections 

for developing regions: although levels are declining 

throughout developing regions, demographers do not 

have much information about how many children families in those regions desire or how (or why) those preferences are changing over time. Fertility may not necessarily decline with rising income in all regions: for instance, 

wealthy, oil-producing Saudi Arabia and Oman are experiencing long-term declines in total fertility, but such declines began earlier and progressed more rapidly in 

poorer, non-oil-producing countries such as Egypt and 

Jordan.

Given all of those considerations, the United Nations’ 

standard or “medium” assumption that total fertility will 

generally trend to about 1.85 children per woman—with 

all developed countries and many developing countries 

reaching that rate by 2050—appears to be reasonable, but 

actual outcomes may deviate substantially.

Ranges of Uncertainty. Several research groups have produced sets of projections to characterize some of the uncertainty surrounding their central estimates. The United 

Nations’ most recent published projections include a set 

involving alternate assumptions about trends in fertility, 

2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

0

5

6

7

8

9

10

11

United Nations'

Low Variant

United Nations'

Medium Variant

United Nations' High Variant

U.S. Census Bureau

IIASA's 10th Percentile

IIASA's 90th Percentile
GLOBAL POPULATION AGING IN THE 21ST CENTURY AND ITS ECONOMIC IMPLICATIONS 17

life expectancy, and net migration (see Figure 8.) Variations in fertility assumptions of about half a child per 

woman less or more than the middle assumption result in 

global population levels of 7.7 billion to 10.6 billion in 

2050. Similarly, the National Research Council, assessing 

an earlier projection by the United Nations, concluded 

that there was a 95 percent probability that the global 

population would be between 7.9 billion and 10.9 billion 

in 2050, with a median estimate of 8.9 billion.20 Another 

group, the International Institute for Applied Systems 

Analysis (IIASA), has arrived at very similar results using 

a more detailed probabilistic approach. IIASA’s median 

projection for global population in 2050 is 8.8 billion, 

with a roughly 80 percent chance that the population will 

be between 7.3 billion and 10.4 billion (Lutz, Sanderson, 

and Scherbov, 2004).

All of those groups project greater uncertainty for individual countries’ populations than for the world as a 

whole. Projections of migration are particularly speculative: migration data are often unreliable; migration is often caused by unpredictable events such as wars and famines; and public policy plays a predominant and 

unpredictable role in determining migration levels.21

The uncertainties in fertility and mortality trends also 

contribute to uncertainties in projections of dependency 

ratios for youth and the elderly. For example, under the 

United Nations’ alternative projections with lower and 

higher fertility ratios, youth dependency in the United 

States varies from 25 percent to 46 percent in 2050, 

whereas old-age dependency varies from 40 percent to 32 

percent.

The similarity of those groups’ ranges of projections suggests that they may provide a realistic bracketing of the 

range of likely population levels in 2050. Moreover, past 

global projections have turned out to be fairly accurate, 

suggesting that outcomes near the extremes of the uncertainty range are unlikely, barring unexpected shocks. 

Nevertheless, neither past errors nor the uncertainty 

ranges encompass the full range of possible outcomes: unpredictable events such as technological advances, natural 

disasters, and war could yield population levels higher or 

lower than the ranges presented here.

The Economic Effects of the

Demographic Transition

By causing large shifts in the age structure of the population, a country’s demographic transition can contribute 

to significant changes in its economy. Those changes occur because people’s economic behavior—particularly 

their saving—tends to vary in predictable ways over their 

lifetimes (see Box 3). As the relative sizes of different age 

groups change over periods of decades, then, aggregate 

economic behavior should also shift in predictable ways:

B Children and young adults tend to consume more 

than they produce as they grow up and acquire an education. Rapid growth in the number of children in 

the early stages of the transition can therefore reduce 

the accumulation of physical capital and slow the rate 

of economic growth. That effect may be partly responsible for the relatively low rates of growth of many African countries in the past few decades (Bloom and 

Canning, 2004a).

B Working-age adults tend to produce more than they 

consume; they also save more than do other groups—

especially in the later stages of their careers. Therefore, 

as a country’s boom generations enter the workforce, 

the rate of economic growth may rise. The economy 

also may experience increases in saving and investment 

per capita and thus may grow even more rapidly—especially if families begin to reduce the number of children they have, freeing people to participate in the 

workforce for longer than they would otherwise. 

(Such a demographic dividend is believed to have contributed to the relatively rapid growth of some East 

Asian countries, as well as that of Ireland in recent 

years.) When the workforce is relatively young, investment may exceed saving, but as the workforce ages, 

saving is more likely to exceed investment (Williamson, 2001).

B By contrast, old people tend to consume more than 

they produce and to spend more on health care than 

do other groups. Moreover, as a country’s boom generations begin to retire and relatively few young people 

replace those generations in the labor force, the rate of 

economic growth may begin to slow. Although such 

effects are not widely evident yet, they are expected to 

appear in many developed countries over the next generation. (For instance, CBO’s projections show slower 

20. National Research Council (2000, p. 10).

21. Lutz, Sanderson, and Scherbov (2004); Census Bureau (2004); 

and Hollman, Mulder, and Kallan (2000).
18 GLOBAL POPULATION AGING IN THE 21ST CENTURY AND ITS ECONOMIC IMPLICATIONS

growth in potential gross domestic product in the future as the growth in the labor force slows and investment’s share of GDP declines.)

B The gradual improvements in health and life expectancy that underlie all of those cohort effects may have 

an independent macroeconomic effect. Knowing they 

are likely to live longer than previous generations did, 

people may decide to work longer, or save more for a 

longer retirement, or both. In the United States, that 

phenomenon was long overshadowed by the impact of 

rising incomes, which, by making workers wealthier, 

have allowed them to retire earlier and enjoy more leisure. However, the gradual but sustained rise since the 

mid-1990s in the participation of older men in the labor force may indicate that some people are adjusting 

their expectations to the likelihood that they will live 

longer, healthier lives (Bloom and Canning, 2004b).

Although such macroeconomic effects of the demographic transition may seem straightforward, they tend to 

be outweighed and obscured by the effects of business cycles, productivity growth, public policies, and other influences. Researchers have therefore found it difficult to distinguish such effects empirically from the myriad of other 

factors that contribute to or inhibit economic growth—

so much so that, until recently, most experts tended to 

subscribe to a “neutralist” view that population shifts do 

not tend systematically to promote or impede the growth 

of per capita income.22 Nevertheless, recent studies sugBox 3.

How People’s Saving Changes over Their Lifetimes

The standard framework that economists use to understand how people behave over their lifetimes is 

called the “life-cycle theory” or “life-cycle model.” 

That model is based on the idea that people try to 

maintain a relatively stable level of well-being 

throughout their lives. According to the model, one 

important way that they do so is to save during periods when they believe their income is relatively 

high—generally by developing skills in their early 

years and saving income during their prime earning 

years—and to draw down their savings when they 

believe their income is relatively low—for instance, 

by spending down their accumulated savings in retirement.1 As a result, the model predicts that people’s saving rates will tend to be hump-shaped over 

time: young people save relatively little, middle-aged 

ones save significantly more, and old people save less 

or even consume some of their savings. Similarly, the 

model predicts that in the face of considerable uncertainty about whether they may become unemployed 

and about how much income they may have, people 

will accumulate precautionary savings to tide them 

over during possible periods of low employment or 

income.

State-of-the-art versions of the life-cycle model appear to match certain aspects of the behavior of 

many (but not all) households, suggesting that they 

do aim to maintain a relatively stable level of well-being in the face of both anticipated changes and 

shocks.2 However, even the most advanced versions 

of the model do not match all aspects of actual behavior, suggesting that people have diverse motives 

that the model does not account for.

Several researchers have used sophisticated versions 

of the life-cycle model to study the implications of 

population aging in a single country.3 To date, however, only relatively simple versions of the model 

(such as those discussed in this paper) have been 

used to analyze the effects of the full demographic 

transition in one or more countries. Those studies 

provide some general insights into the economic implications of demographic transitions, but their results are best thought of as possible scenarios rather 

than forecasts of likely future outcomes.

1. For an introduction to life-cycle modeling and related 

empirical literature, see Browning and Crossley (2001). An 

older but more detailed reference is Deaton (1992).

2. See, for example, Scholtz, Seshadri, and Khitatrakun (2004).

3. See, for example, Nishiyama (2004).
GLOBAL POPULATION AGING IN THE 21ST CENTURY AND ITS ECONOMIC IMPLICATIONS 19

gest that the demographic transition may have the sorts 

of macroeconomic consequences that standard economic 

theory would predict (Williamson, 2001; and Bloom and 

Canning, 2004a). An increase in the share of a country’s 

population that is of working age tends to be associated 

with higher rates of saving and investment and higher 

output and wealth per capita, whereas an increase in the 

youth or elderly shares has the opposite effect (Callen, 

Batini, and Spatafora, 2004).

The effect of the demographic transition on aggregate 

output may be the opposite of its effect on individuals 

(Bryant, 2004). For instance, a growing labor force may 

increase aggregate output and consumption but may also 

increase competition among workers, which tends to reduce individual wages and even per capita output. An aging population may experience declining total output, 

but the declining workforce may experience rising wages 

and per capita output.

Different Effects of Changes in Mortality and

Fertility

The effects of an aging population on a country’s economy depend on the relative importance of changes in 

mortality and fertility as well as the timing of those 

changes (Bryant, 2004). Rising life expectancy and falling 

fertility contribute to population aging in different ways. 

All else being equal, an increase in life expectancy causes a 

gradual increase in a country’s population, labor force, 

and output and tends to increase the old-age dependency 

ratio.23 In contrast, declining fertility tends to reduce 

population, labor force, and output and to decrease youth 

dependency over the long run. (As mentioned previously, 

however, that decrease in youth dependency may allow 

the workforce to save and invest more for a few decades, 

thus yielding an increase in economic growth.)

If fertility declines several generations after life expectancies start to rise, instead of within a generation, the population will expand much more and the labor force will 

tend to grow for a longer period of time. If fertility falls 

very rapidly instead of gradually, dependency ratios of 

youth and the elderly will change more rapidly. Similarly, 

effects will vary depending on whether life expectancies 

increase relatively slowly or very rapidly.

An aging population can trigger divergent effects on a 

country’s supply of domestic savings and its demand for 

investment (Bosworth, Bryant, and Burtless, 2004). For 

example, a country with a young, rapidly growing labor 

force may not save a great deal but may have a high demand for investment. In contrast, a country with falling 

fertility and a rapidly aging labor force may have higher 

saving but lower demand for investment. Depending on 

the relative strength and timing of fertility and mortality 

trends, aging may affect saving more than investment or 

vice versa.

In a relatively closed economy—a country that restricts 

the international movement of goods and financial capital—such variations would lead to changes in rates of return. (For instance, low saving relative to investment demand will tend to raise rates of return, inducing greater 

saving and lower investment until the two come into balance.) In an open economy, however, those variations 

may also lead to international flows of capital from countries with high saving relative to investment to those with 

high investment demand relative to saving. Those flows, 

in turn, will tend to affect rates of return and levels of 

output in both sets of countries—as will the relative size 

of the countries’ economies. The next two sections discuss domestic effects of a transition and the cross-border 

implications of differences in the timing and pace of transitions in different countries.

Saving, Retirement, and Returns

The available evidence indicates that demographic 

changes have measurable but relatively limited effects on 

saving and retirement, on the demand for different types 

of financial and real assets, and on asset prices and rates of 

return (Poterba, 2004; and Bosworth, Bryant, and Burtless, 2004). That evidence suggests that other influences—such as business cycles, technological changes, 

and unexpected shocks—tend to have impacts on saving 

decisions and asset markets that are large enough to obscure the influence of population shifts. In some important cases, the historical evidence is quite puzzling: for instance, during the past two decades, as the baby-boom 

generation has reached its prime working and saving

years in the United States and the country has enjoyed 

22. For instance, the United States experienced a relatively constant 

saving rate from the late 1940s to the mid-1980s despite the birth 

of the baby-boom generation and its entry into the labor market. 

Then, as the baby boomers reached their peak earning years, the 

saving rate began to trend downward.

23. The economic effects of rising life expectancy also depend on 

whether the rise results mainly from reductions in infant mortality 

or from reductions in adult mortality. 
20 GLOBAL POPULATION AGING IN THE 21ST CENTURY AND ITS ECONOMIC IMPLICATIONS

relatively low levels of both youth and elderly dependency, the private saving rate has consistently trended 

downward.

Despite the lack of strong empirical evidence for demographic impacts on saving, investment, and asset markets, 

some experts contend that the theoretical arguments in 

favor of such effects are too strong to discount. For instance, studies that use simulation models to analyze the 

economic effects of a stylized demographic shift—a baby 

boom followed by a bust, similar to that experienced by 

the United States—generally conclude that the shift may 

generate modest changes in levels of saving and investment and may thus modestly affect rates of return (Poterba, 2004; and Geanakoplos, Magill, and Quinzii, 

2004). Typically, such studies find that both investment 

demand and rates of return rise as the baby boomers enter 

the workforce, that rates of return tend to fall as that generation reaches its peak saving years, and that investment 

demand falls as the generation retires. The relative demand for risky and riskless assets also may shift, affecting 

the risk premium—the higher rate of return earned by 

stocks compared with bonds (Brooks, 2003).

Box 4.

International Flows of Goods, Services, and Capital

As an extended period of relative peace, institutional 

developments, and rapid technological advances has 

helped sustain the expansion of international economic activity since the end of World War II, countries around the world have become increasingly economically interdependent. Households and firms 

have increasingly substituted foreign goods for domestically produced ones and foreign investments 

for domestic ones.1

 That interdependence can be 

seen in the growing importance of international 

trade and foreign investment in most countries’ 

economies and in the decreasing correlation between 

national rates of saving and investment.2

Interdependence increasingly exposes many countries to the effects of economic developments and 

policies in other countries. If demand falls in one 

country, for instance, other countries’ exports to that 

country also will tend to fall. Conversely, if changes 

in a country’s tax code lead to greater opportunities 

for profitable investment, investors from other countries may channel more funds there, thus reducing 

the funds available elsewhere.

As those examples illustrate, the effects can be transmitted through trade flows or through investment 

flows. In a closed economy, domestic demand must 

be met through domestic production, and investment must be funded by domestic saving. An open 

economy, in contrast, can have more (or less) consumption than output and more (or less) investment 

than saving. The difference between output and consumption will be made up by net exports, and the 

difference between investment and saving will be 

made up by net inflows of financial capital from 

other countries.

In fact, trade imbalances must be offset by investment flows. A net inflow of capital—in effect, an international loan—will allow the citizens of a country 

to consume more than they produce in the aggregate. Such an inflow will be accompanied by a trade 

deficit—an excess of imports over exports. A net outflow of capital, conversely, will be accompanied by a 

trade surplus: in effect, a country cannot lend the 

world money unless it also sells more to the rest of 

the world than it buys from it.

1. Bosworth, Bryant, and Burtless (2004).

2. For example, trade has become much more important to the 

U.S. economy: U.S. exports rose from about 5 percent of 

gross domestic product (GDP) during the 1960s to more 

than 10 percent during the 1990s, while imports rose from 

about 5 percent of GDP to nearly 12 percent. Similarly, the 

stock of U.S. investments overseas was the equivalent of 

about 25 percent of GDP in 1976 but rose to about 65 percent in 2003, while foreigners’ investments in the United 

States rose from the equivalent of 16 percent of GDP in 

1976 to nearly 88 percent in 2003. Helliwell (2004) discusses the decreasing correlation between national rates of 

saving and investment.
GLOBAL POPULATION AGING IN THE 21ST CENTURY AND ITS ECONOMIC IMPLICATIONS 21

Other theoretical studies, which focus on the effect of rising life expectancy, conclude that longer life spans are 

likely to lead people to invest more in their education, 

work longer, and save more—but less than proportionately to the increase in life expectancy. Thus, every year of 

increased life expectancy is likely to increase the amount 

of time spent working by proportionately less than it increases the time spent in retirement (Bloom, Canning, 

and Moore, 2004).

International Effects

One important reason why the economic effects of demographic shifts may be difficult to observe is that most 

countries’ economies are increasingly interconnected to 

others through international flows of goods, services, and 

financial capital. (Migration between countries adds an 

additional complication.) Because changes in the age 

structure of a country’s population—such as those 

brought about by the demographic transition—can affect 

its levels of output, consumption, saving, and investment, 

they can also influence other countries’ economies 

through such international flows (see Box 4). Moreover, 

those international flows can work to offset or enhance 

the domestic effects of the shifts in population. With 

countries going through different phases of the transition 

at different rates, the effects of each country’s transition 

on the others are very difficult to untangle.

Thus, the growing degree of interdependence greatly 

complicates efforts to understand the economic effects of 

the demographic transition in any given country. Researchers are only beginning to develop a rigorous understanding of those interactions at a theoretical level and to 

empirically distinguish such effects from the many other 

economic variables that influence trade and capital flows 

(Bryant, 2004).

As with empirical research on the domestic economic effects of demographic shifts, research on the cross-border 

effects is complicated by the fact that changes in fertility 

and mortality vary among countries and are occurring simultaneously. That variation and simultaneity, combined 

with the myriad of other influences that affect international flows, make it difficult to distinguish specific effects from demographic developments. Nevertheless, current research indicates that countries with relatively large 

shares of their population of working age—such as most 

developed countries, as well as China—tend to have more 

saving than investment and therefore tend to have capital 

outflows. (In this respect, the United States is unusual in 

having more investment than saving.) In contrast, countries with relatively large shares of very young or old dependents—such as the developing countries—tend to 

have capital inflows (Helliwell, 2004).

Those research findings accord well with the results of recent theoretical studies. Such studies generally conclude 

that, all else being equal, countries that experience rising 

life expectancy and declining fertility sooner than others 

do—or that have more rapid or dramatic changes relative 

to others—will tend to have greater saving than domestic 

investment opportunities as their boom generations reach 

their peak saving years (Brooks, 2003; Bryant, 2004; and 

Bosworth, Bryant, and Burtless, 2004). That excess capital will tend to flow to the countries whose transitions are 

occurring later or less rapidly or dramatically, reducing 

the real exchange rate of the capital-exporting country’s 

currency and raising those of the importing countries’ 

currencies.24

The capital flows that result from international differences in fertility or mortality trends also tend to transmit 

some of the economic effects of the sending country’s demographic transition to the countries that receive the 

flows. For example, current research suggests that the capital outflows that result from a decline in fertility may 

tend to moderate the decline in rates of return that would 

occur in the sending country if all of the capital were invested domestically (Bryant, 2004). The outflows may 

also reduce rates of return in the receiving country. Simi24. Matters become more complex, however, if some countries have 

begun their transitions sooner, but other countries, which began 

their transitions later, are going through their transitions more 

rapidly. In such cases—which may be the most realistic ones—the 

direction of flow is less clear-cut, and further research is needed to 

clarify understanding.

Theoretical studies find that the effects of demographic shifts on a 

country’s exchange rate may also depend on how they affect the 

relative size of the country’s population and economy compared 

with those of other countries. Rising life expectancy alone will 

tend to increase a country’s long-run population and output, 

increasing the supply of its products on international markets and 

thus, perhaps, reducing their relative price (the exchange rate). In 

contrast, declining fertility alone will tend to reduce the country’s 

population and output, making its products relatively scarce and 

possibly increasing their price. (That price effect will depend on 

consumers’ relative preferences for products from different countries.) Which effect dominates at any given point will depend on 

the comparative strength of the country’s mortality and fertility 

trends—and the strength of its trends relative to those of other 

countries.
22 GLOBAL POPULATION AGING IN THE 21ST CENTURY AND ITS ECONOMIC IMPLICATIONS

Figure 9.

Working-Age Population Shares, 1950 to 2050

(Population ages 18 to 64 as a percentage of total)

Source: United Nations, World Population Prospects, 2004 Revision.

larly, capital outflows that result from an increase in life 

expectancy may also tend to moderate the decline in rates 

of return for a period of time. Over the longer run, however, as elderly populations spend down their savings, 

capital flows back into the country may tend to reduce 

domestic rates of return.

The current tendency should be for capital to flow from 

countries with large working-age shares to those with 

smaller shares—that is, from the developed countries and 

China to the other developing countries. However, that 

trend could gradually reverse over the next few decades as 

the working-age share of the population begins to decline 

in the developed countries and China and the workingage share continues to rise in the other developing countries (see Figure 9). With developing countries reaping 

the benefits of declining fertility and rapid growth in 

their working-age populations, it may well be the case 

that capital—and workers—will tend to flow from developing countries to developed ones. In fact, the United 

States has experienced unexpectedly large capital inflows 

(as well as immigration) from developing countries in recent years. 

The Influence of Public Policy

The macroeconomic effects of the demographic transition also may be enhanced or offset by a country’s economic policies and institutions. For example, a country’s 

demographic dividend may be enhanced by deliberate investment in the education of its growing workforce, by 

the development of flexible financial markets to channel 

savings to productive uses, and by openness to trade—as 

appears to have been the case in several East Asian countries that experienced significant economic growth in the 

past few decades. In contrast, policies that tend to discourage investment and trade could offset the benefits of 

a growing workforce, as is believed to have occurred in 

many developing countries in Latin America and Africa. 

In such cases, a rapidly expanding, young, working-age 

population may become a source of social and political 

stress rather than of economic growth.

Similarly, the extent to which a country can support an 

expanding elderly population is likely to depend on its 

success in taking advantage of its demographic dividend. 

Countries that grow old before they grow rich may face 

enormous challenges in providing for an increasing number of elderly citizens. Policies that encourage adequate 

1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050

0

40

50

60

70

United States

More-Developed Countries

(Excluding United States)

China

Less-Developed Countries

(Excluding China and Least-Developed) Least-Developed

Countries

Historical Estimates Projections (Medium Variant)
GLOBAL POPULATION AGING IN THE 21ST CENTURY AND ITS ECONOMIC IMPLICATIONS 23

retirement preparations could help a country prepare for 

a growing elderly population, whereas the effects of aging 

could be exacerbated by pension programs that discourage private saving or continued part-time work in retirement or that encourage relatively early retirement.25 The 

existence of a public pension system—particularly an unbalanced system that places increasing stress on a government’s fiscal position—may tend to discourage some private saving for retirement and thus may greatly reduce the 

cushioning effects of open-economy interactions on demographic stresses (Bryant, 2004). Developed countries 

appear to face varying degrees of vulnerability to pensioninduced stresses. For example, France, Italy, and Spain 

face a high degree of vulnerability, whereas the United 

States, United Kingdom, and Australia face considerably 

less (Jackson and Howe, 2003).

Some observers have proposed an increase in immigration 

from relatively youthful developing countries to aging 

ones as a means of mitigating some of the economic stress 

caused by aging populations in developed countries. 

Those observers argue that more immigration would increase the workforce available to support the elderly population (without the additional cost of raising the workers), thus reducing the cost of support per individual 

worker. Recent research on that issue, however, suggests 

that increased immigration may do little to offset the 

stresses of aging on developed countries’ pension systems 

(Fehr, Jokisch, and Kotlikoff, 2003).

25. Some studies even suggest a feedback effect between retirement 

policies and fertility. The results of those studies imply that policies that make it easier to accumulate retirement savings—or that 

guarantee retirement benefits—may reduce the incentive to have 

children and may thus contribute to a more rapid decline in fertility than would have been the case without them (Ehrlich and 

Kim, 2005; and Boldrin, De Nardi, and Jones, 2005).

A

The Phases of the Demographic Transition: 

An Illustrative Example

The phases of the demographic transition discussed 

on page 6 are illustrated in the accompanying figures, 

which present a generic, hypothetical demographic transition based largely on historical and population trends in 

developed and developing regions of the world.1

 On the 

basis of assumed trends in fertility and mortality rates, 

death rates decline and birth rates rise after 20 years, and 

birth rates stabilize and then decline after 90 years (see 

Figure A-1). The population growth rate rises for nearly a 

century, peaking at around 2.6 percent per year after 

about 100 years, but gradually declines thereafter and 

falls below zero within 220 years. The population itself 

quadruples during the first century and quadruples again 

in the second century but begins to gradually decline 

thereafter. The expansion and decline are also accompanied by substantial shifts in the population structure, 

with a long-term decline in the youth share of the population and an increase in the elderly share. Population 

pyramids—showing the distribution of the population by 

10-year age groups—for years 20, 90, 190, and 250 illustrate the increase in population as well as the growing size 

of the elderly population over time (see Figure A-2).

APPENDIX

1. The hypothetical transition is calculated in 10-year increments so 

that rates are average annual rates over 10-year increments. Birth 

rates are calculated as the ratio of 0- to 9-year-olds at the end of a 

decade to the total population at the beginning. Death rates are 

calculated as one minus the ratio of people 10 years of age or older 

at the end of a decade to the total population at the beginning.
26 GLOBAL POPULATION AGING IN THE 21ST CENTURY AND ITS ECONOMIC IMPLICATIONS

Figure A-1.

Illustrative Crude Birth and Death Rates

(Percent per year)

(Percent per year)

(Millions)

(Percent)

Source: Congressional Budget Office.

0 50 100 150 200 250

0

1

2

3

4

Birth Rate

Death Rate

Span of Time (Years)

Illustrative Crude Birth and Death Rates

0 50 100 150 200 250

-1

0

1

2

3

4

Span of Time (Years)

Illustrative Population Birth Rate

0 50 100 150 200 250

0

4

8

12

16

20

Span of Time (Years)

Illustrative Population

0 50 100 150 200 250

0

10

20

30

40

50

60

Span of Time (Years)

Ages 0 to 19

Ages 20 to 59

Ages 60 and Older

Illustrative Population Pyramid Structure
APPENDIX A THE PHASES OF THE DEMOGRAPHIC TRANSITION: AN ILLUSTRATIVE EXAMPLE 27

Figure A-2.

Population Pyramid for the Illustrative Demographic Transition

(Age)

Source: Congressional Budget Office.

 0 to 9

 10 to 19

 20 to 29

 30 to 39

 40 to 49

 50 to 59

 60 to 69

 70 to 79

 80 to 89

90 and Older Male Female

Thousands

1,500 900 300 300 900 1,500

Year 20

 0 to 9

 10 to 19

 20 to 29

 30 to 39

 40 to 49

 50 to 59

 60 to 69

 70 to 79

 80 to 89

90 and Older Male Female

Thousands

1,500 900 300 300 900 1,500

Year 190

 0 to 9

 10 to 19

 20 to 29

 30 to 39

 40 to 49

 50 to 59

 60 to 69

 70 to 79

 80 to 89

90 and Older Male Female

Thousands

1,500 900 300 300 900 1,500

Year 90

 0 to 9

 10 to 19

 20 to 29

 30 to 39

 40 to 49

 50 to 59

 60 to 69

 70 to 79

 80 to 89

90 and Older Male Female

Thousands

1,500 900 300 300 900 1,500

Year 250

B

Definition of Regions

This paper classifies the world’s countries into five regions that are defined largely on the basis of a United Nations classification, according to which the developed 

countries include all of the European and North American countries, as well as Japan, Australia, and New 

Zealand. All other countries are classified as less developed, with a subclass of countries defined as least developed. Apart from the United States and China, which are 

classified as distinct regions, this paper follows the United 

Nations classification.

The classification is relatively straightforward and simple 

to use, but it obscures some important differences among 

countries. Most importantly, several countries in the 

south and east of Europe are classified as developed, even 

though they have much lower average incomes than some 

industrialized Asian countries classified as less developed. 

However, those sets of countries are not very populous, 

and the distinction between developed and lessdeveloped countries is largely valid.

APPENDIX

Developed Countries

(Excluding the United States) Less-Developed Countries (Excluding China)

Least-Developed

Countries

North America

Canada

Bermuda

Greenland

Saint-Pierre-et-Miquelon

Asia

Japan

Oceania

Australia

New Zealand

Europe (Western)

Austria

Belgium

France

Germany

Liechtenstein

Luxembourg

Monaco

Netherlands

Switzerland

Europe (Northern)

Channel Islands

Denmark

Estonia 

Faeroe Islands

Finland

Iceland

Ireland

Isle of Man

Africa (Eastern)

Kenya

Mauritius

Réunion

Seychelles

Zimbabwe

Africa (Middle)

Cameroon

Congo

Gabon

Africa (Northern)

Algeria

Egypt

Libyan Arab Jamahiriya

Morocco

Tunisia

Western Sahara

Africa (Southern)

Botswana

Namibia

South Africa

Swaziland

Africa (Western)

Côte d'Ivoire

Ghana

Nigeria

St. Helena 

Asia (Eastern)

China, Hong Kong SAR

China, Macao SAR

Democratic People’s 

Republic of Korea

Mongolia

Republic of Korea

Asia (South-central)

India

Iran (Islamic Republic of)

Kazakhstan

Kyrgyzstan

Pakistan

Sri Lanka

Tajikistan

Turkmenistan

Uzbekistan

Asia (Southeastern)

Brunei Darussalam

Indonesia

Malaysia

Philippines

Singapore

Thailand

Viet Nam

Africa (Eastern)

Burundi

Comoros

Djibouti

Eritrea

Ethiopia

Madagascar

Malawi

Mozambique

Rwanda

Somalia

Uganda

United Republic of Tanzania

Zambia

Africa (Middle)

Angola

Central African Republic

Chad

Democratic Republic of the 

Congo

Equatorial Guinea

Sao Tome and Principe

Africa (Northern)

Sudan

Africa (Southern)

Lesotho
30 GLOBAL POPULATION AGING IN THE 21ST CENTURY AND ITS ECONOMIC IMPLICATIONS

Developed Countries

(Excluding the United States) Less-Developed Countries (Excluding China)

Least-Developed

Countries

Europe (Northern), Continued

Latvia

Lithuania

Norway

Sweden

United Kingdom 

Europe (Eastern)

Belarus

Bulgaria

Czech Republic

Hungary

Poland

Republic of Moldova

Romania

Russian Federation

Slovakia

Ukraine

Europe (Southern)

Albania

Andorra

Bosnia and Herzegovina

Croatia

Former Yugoslav Republic of 

Macedonia

Gibraltar

Greece

Holy See

Italy

Malta

Portugal

San Marino

Serbia and Montenegro

Slovenia

Spain

Asia (Western)

Armenia

Azerbaijan

Bahrain

Cyprus

Georgia

Iraq

Israel

Jordan

Kuwait

Lebanon

Occupied Palestinian Territory

Oman

Qatar

Saudi Arabia

Syrian Arab Republic

Turkey

United Arab Emirates

Latin America and the

Caribbean (Caribbean)

Anguilla

Antigua and Barbuda

Aruba

Bahamas

Barbados

British Virgin Islands

Cayman Islands

Cuba

Dominica

Dominican Republic

Grenada

Guadeloupe

Jamaica

Martinique

Montserrat

Netherlands Antilles

Puerto Rico

Saint Kitts and Nevis

Saint Lucia

Saint Vincent and the 

Grenadines

Trinidad and Tobago

Turks and Caicos Islands

United States Virgin Islands

Latin America and the

Caribbean (Central

America)

Belize

Costa Rica

El Salvador

Guatemala

Honduras

Mexico

Nicaragua

Panama

Latin America and the

Caribbean (South America)

Argentina

Bolivia

Brazil

Chile

Colombia

Ecuador

Falkland Islands (Malvinas)

French Guiana

Guyana

Paraguay

Peru

Suriname

Uruguay

Venezuela

Oceania (Melanesia)

Fiji

New Caledonia

Papua New Guinea

Oceania (Micronesia)

Guam

Marshall Islands

Micronesia (Federated 

States of)

Nauru

Northern Mariana Islands

Palau

Oceania (Polynesia)

American Samoa

Cook Islands

French Polynesia

Niue

Pitcairn

Tokelau

Tonga

Wallis and Futuna Islands

Africa (Western)

Benin

Burkina Faso

Cape Verde

Gambia

Guinea

Guinea-Bissau

Liberia

Mali

Mauritania

Niger

Senegal

Sierra Leone

Togo 

Asia (South-central)

Afghanistan

Bangladesh

Bhutan

Maldives

Nepal

Asia (Southeastern)

Cambodia

Democratic Republic of 

Timor-Leste

Lao People’s Democratic 

Republic

Myanmar

Asia (Western)

Yemen

Latin America and the

Caribbean (Caribbean)

Haiti

Oceania (Melanesia)

Solomon Islands

Vanuatu

Oceania (Micronesia)

Kiribati

Oceania (Polynesia)

Samoa

Tuvalu
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