Demographic aging and the likely economic and social effects have so far been a subject of intensive research and policy discussions in the US, Europe and some Latin American and a few Asian countries, in particular Japan, Korea, Singapore and Taiwan. This book extends the relevance and discussion to all of Asia and states that ‘rapid demographic change toward older population is one of the biggest, if not single biggest, medium-term structural challenges confronting developing Asia in the post-global crisis period’. This publication by the Asian Development Bank (ADB) is edited and authored by a blend of 15 regional academics as well as staff from the ADB's research department. It has nine individually authored chapters, each with references and often comprehensive annex tables, starting out with an overview in Chapter One on. The conceptual issues that are then individually deepened in four subject chapters and three country chapters (on China, India, and Japan) and ending with a chapter on main findings and policy recommendations.
While there is a lot of heterogeneity among Asian countries with regard to the stage of demographic transition, the editors and also key authors of the book see a lot of commonality with regard to the origins of demographic aging and Asian specifics, key challenges, key strategies to address them and key obstacles of realization. Specifically, demographic aging is seen as being driven by a fall in the fertility rate and less an issue of an increase in life expectancy. This is in contrast to the US and much of Europe where both causes are currently broadly equally shared. The key challenge of aging is seen as the capacity to sustain economic growth while developing a pension system for old-age income support. The two key strategies to address both these challenges are promoting physical capital and investing in human capital. Finally the two key obstacles for realizing the strategies are underdeveloped financial systems and rigid labor markets. The main theme throughout the book is the view and vision that the first demographic dividend from which much of Asia could profit, and from which some demographic and economic laggard countries are still hoping to profit (a rising share of labor force in the population that can be productively employed in an accommodating economic environment), can be followed by a second demographic dividend under an aging population. This would increase saving in anticipation of aging and demand for capital, giving rise to capital deepening as mechanism to sustain growth.
The book offers very useful and rich analyses and data on past and projected demographic and economic developments in Asian countries (or in most chapters at least for a sub-set of them), and discusses also Asian specificities such as the continued high-level of co-habitation of the elderly and its implications. Thus the book, together with two 2011 publications on pensions systems and old-age income support by the ADB, offers a comprehensive insight into aging related institutions, economic and social issues and possible solutions in Asia.
However, this publication is also based on specific views on aging issues and uses a specific and limited set of methodologies to investigate the projected impact of aging on economic outcomes. It holds strong views on some design features and does not mention, even less discuss, some of the topics that matter, and one would expect to feature. More specifically demographic and individual aging is essentially seen and dealt with within traditional age limits (say 60+), with no view and vision about prospective aging that takes account of the projected increase in life expectancy in all countries. This limits analysis, results, and policy vision.
Most chapters make intensive use of National Transfer Accounts (NTA) that are available in various countries of the region and that offer interesting and new, albeit often not clear and agreed, insights into key flows of funds (asset-based, family and public transfers) between, and at each age, and how to interpret them. Nevertheless, this NTA information and the projected (traditional) demographic aging measures form the base for projecting and assessing the impact on key economic variables such as economic growth or consumption for the next 10, 20 or more years (in simple reduced form or limited number equation systems). No benchmarking or reference to results of CGE models is undertaken or even mentioned. The applied estimation methods and interpretation of econometric results, at times, surprises. In consequence the projected results are interesting and perhaps informative but lack conviction.
Various chapters warn of an extensive use of public transfer methods to finance old-age income support compared to asset-based methods. Some of the warnings with regard to the political economy of resistance to future cuts are well taken. For others it is not clear if the concerns apply to the funding-type (unfunded or funded) or the benefit-type (DB or DC), and if in the case of funding this would be justified.
Last, but not least, the publication makes no reference at all to issues such as the impact of demographic aging on the rate of return of alternative old-age income support system (i.e. funded or un-funded), a critical aspect for policy selection, and what it means for a region that is a major share of the world financial market and hence the limitations on risk diversification this implies. The chapters make only very limited reference to the role of the labor market in successfully addressing population aging in macro-economic terms, and to policy challenges to adjust the labor market for the increasing number of elderly in micro-economic/institutional terms. Perhaps, this is an issue a future publication should take on and is able to draw on the increasing experience of countries inside the region (say Japan) and outside the region (say, Finland, Germany and the US).
