The political impact of ageing on the economy

Project outline

 

This project investigates the political impact of ageing on economic performance in advanced economies. Since elderly individuals may have different policy preferences, their growing number may influence the policies that electorally responsive governments choose to adopt, which in turn affects economic performance and inequality.

The first aim of the project is to carry out a systematic literature review of existing studies on the effects of ageing on politics and policies across several disciplines, including social policy, economics, politics, sociology, and population studies. This will provide a solid foundation for the development of a theoretical framework linking ageing to economic outcomes.

The second aim is to collect and analyse several existing datasets covering the policy preferences of elderly individuals, the position of political parties on public policies, and the variation in economic and social policies, as well as various economic outcomes in a sample of 20 OECD countries in the period 1970-2010. The variation over time and across countries of these indicators will be  mapped and preliminary empirical analysis will identify linkages between them.

This scoping exercise of previous literature and available datasets will result in two journal articles. It will thus contribute to our understanding of one of the main challenges facing contemporary welfare states and to existing studies on the consequences of ageing.

 

Vlandas, T. (2021) “Ageing and the Economy: a Literature Review of Political and Policy Mechanisms” Political Research Exchange

Population ageing, and the decline in the working-age population, represent a profound global demographic shift. What political consequences do ageing populations have for the economies of advanced democracies? To address this question, we carry out a wide-ranging, systematic literature review using network-based community detection algorithms and manual coding to select almost 150 articles. We find that research in this area typically focuses on a few mechanisms and is therefore – by design – unable to identify gaps in existing knowledge or assess interactions between different strands of literature. Our review suggests that ageing has important implications for a variety of domains including electoral behaviour, social policy preferences, and public spending. Taken together, the political consequences of population ageing are likely to have previously overlooked and indirect impacts on economic outcomes. Future research should, therefore, examine how population ageing shapes political dynamics and policy choices in ways that also affect the economy.

 

Vlandas, T. (2018) “Grey power and the economy: Ageing and inflation across advanced economies” Comparative Political Studies [PDF]

What explains the cross-national variation in inflation rates across countries? In contrast to most literature, which emphasizes the role of ideas and institutions, this article focuses on electoral politics and argues that aging leads to lower inflation rates. Countries with a larger share of elderly exhibit lower inflation because older people are both more inflation averse and politically powerful, forcing parties seeking their votes to pursue lower inflation. Logistic regression analysis of survey data confirms that older people are more inflation averse and more likely to punish incumbents at the ballot box for inflation. Panel data regression analysis shows that social democratic parties have more economically orthodox manifestos in European countries with more elderly people, and that the share of elderly is negatively correlated with inflation in both a sample of 21 advanced economies and a larger sample of 175 countries. Aging therefore pushes governments to pursue lower inflation.

 

Vlandas, T. (2016) “The political effects of Ageing on Inflation” Intereconomics – Review of European Economic Policy [PDF]

Why do different countries exhibit different infl ation rates? Most political economy accounts emphasise the role of ideas and institutions: as economic research shows that low infl ation is achievable at no economic cost, governments delegate monetary policy to independent central banks. Countries with independent central banks and unions that anticipate the consequences of their actions by coordinating wage bargaining in turn achieve lower infl ation. This conventional wisdom downplays the importance of interests, ignoring the signifi cant infl uence that a growing electoral group – the elderly – has on infl ation. Because the elderly are politically powerful and infl ation averse, countries with more elderly citizens force political parties to adopt more economically orthodox policies when in power, resulting in lower infl ation rates in those countries. Ageing populations may therefore lock in a low infl ation regime, even when this is not economically desirable.