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This paper analyzes the macroeconomic implications of population aging in Brazil. Three alternative yet complementary methodologies are adopted, and depending on policy responses to the fiscal implications of aging, there are two main findings: First, saving rates could increase and not necessarily fall as a consequence of aging in Brazil-thus contradicting conventional views. Second, lifetime wealth across generations could increase-as capital deepening generates a second demographic dividend. Two policy responses to aging are emphasized: First, a structural policy response of linking mandatory retirement (or entitlement) ages to increasing life expectancy would boost labor supply and reduce the fiscal costs of aging. Second, in terms of preferable parametric policy responses, the second demographic dividend will be promoted to the highest extent by keeping taxes and debt unchanged while allowing public pensions to adjust downward. Such a policy response would keep pensions from further crowding out private saving-thus balancing capital accumulation with intergenerational income distribution. In conclusion, Brazil will not necessarily experience a fall in saving and growth, but if government policies are appropriately, adequately, and timely formulated, population aging is likely to lead to substantial capital deepening and increases in lifetime income, wealth, and welfare.

Access to Finance --- Debt --- Debt Markets --- Demographic dividend --- Economic growth --- Economic Theory & Research --- Emerging Markets --- Fiscal policy --- Labor Supply --- Macroeconomics and Economic Growth --- Population aging --- Population Policies --- Retirement age --- Saving --- Brazil

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This paper analyzes the macroeconomic implications of population aging in Brazil. Three alternative yet complementary methodologies are adopted, and depending on policy responses to the fiscal implications of aging, there are two main findings: First, saving rates could increase and not necessarily fall as a consequence of aging in Brazil-thus contradicting conventional views. Second, lifetime wealth across generations could increase-as capital deepening generates a second demographic dividend. Two policy responses to aging are emphasized: First, a structural policy response of linking mandatory retirement (or entitlement) ages to increasing life expectancy would boost labor supply and reduce the fiscal costs of aging. Second, in terms of preferable parametric policy responses, the second demographic dividend will be promoted to the highest extent by keeping taxes and debt unchanged while allowing public pensions to adjust downward. Such a policy response would keep pensions from further crowding out private saving-thus balancing capital accumulation with intergenerational income distribution. In conclusion, Brazil will not necessarily experience a fall in saving and growth, but if government policies are appropriately, adequately, and timely formulated, population aging is likely to lead to substantial capital deepening and increases in lifetime income, wealth, and welfare.

Access to Finance --- Debt --- Debt Markets --- Demographic dividend --- Economic growth --- Economic Theory & Research --- Emerging Markets --- Fiscal policy --- Labor Supply --- Macroeconomics and Economic Growth --- Population aging --- Population Policies --- Retirement age --- Saving --- Brazil

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Large oil reserves off the coast of Brazil may substantially increase the country's oil revenue in the future. A natural resource "curse" could be the consequence if an appropriate share of the oil revenue is not invested. This issue is addressed in this paper for Brazil both theoretically and empirically by focusing on (i) the efficient allocation of oil revenue between investment and consumption; and (ii) because it may be efficient to consume a certain share of the oil revenue, the distributional implications across generations of higher public consumption. The main finding is that, if the Pre-Salt oil revenue brings the aggregate oil revenue in Brazil above 10 percent of gross domestic product, there will be scope for consuming a certain share of it while still maintaining efficiency. But unless oil revenue reaches 10 percent or more of gross domestic product, then all of it should be invested in order for the economy to approach the efficient investment level. If oil revenue as a share of gross domestic product was 10 percent, then the achievable growth in gross domestic product could reach 9.0 percent. The distributional implications are positive for all generations, but vary across generations depending on how much of the oil revenue is invested. As a result, transfer policies could be adjusted to ensure equality in its distribution.

Currencies and Exchange Rates --- Debt Markets --- Economic Theory & Research --- Efficiency --- Emerging Markets --- Equity --- Investment and Investment Climate --- Macroeconomics and Economic Growth --- Natural Resources --- Oil Revenue --- Population Aging --- Poverty Reduction --- Saving --- Brazil

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Using a stochastic general equilibrium model with overlapping generations, this paper studies a policy rule for the retirement age aiming at offsetting the effects on the supply of labor following fertility changes. The authors find that the retirement age should increase more than proportionally to the direct fall in labor supply caused by a fall in fertility. The robustness of this result is checked against alternative model specifications and parameter values. The efficacy of the policy rule depends crucially on the link between the preference for leisure and the response of the intensive margin of labor supply to changes in the statutory retirement age. The model has subsequently been calibrated for Brazil by Jorgensen (2010), in the context of the Brazil Aging Study.

Aggregate Income --- Business cycle --- Contribution rate --- Downward pressure --- Early retirement --- Economic Theory & Research --- Exogenous shock --- Exogenous variable --- General equilibrium --- Health, Nutrition and Population --- Human capital --- Labor economics --- Labor force --- Labor Markets --- Labor Policies --- Labor supply --- Labour --- Macroeconomics and Economic Growth --- Market equilibrium --- Payroll tax --- Pensions & Retirement Systems --- Population Policies --- Real wages --- Retirement --- Social Protections and Labor --- Wage rate --- Worker --- Workers

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Using a stochastic general equilibrium model with overlapping generations, this paper studies (i) the effects on both extensive and intensive labor supply responses to changes in fertility rates, and (ii) the potential of a retirement reform to mitigate the effects of fertility changes on labor supply. In order to neutralize the effects on effective labor supply of a fertility decline, a retirement reform, designed to increase labor supply at the extensive margin, is found to simultaneously reduce labor supply at the intensive margin. This backlash to retirement reform requires the statutory retirement age to increase more than proportionally to fertility changes in order to compensate for endogenous responses of the intensity of labor supply. The robustness of this result is checked against alternative model specifications and calibrations relevant to an economic region such as Europe.

Economic implications --- Economic Theory & Research --- Fertility decline --- Fertility rates --- General equilibrium --- Health, Nutrition and Population --- Labor Markets --- Labor Policies --- Labour supply --- Macroeconomics and Economic Growth --- Overlapping generations model --- Pensions & Retirement Systems --- Policy Research Working Paper --- Population Policies --- Retirement --- Retirement age --- Retirement Policy --- Social Protections and Labor