B - EXCAVACION Y RETIRO DE SUELOS-

The model is calibrated on real data until 2000 as described in the previous para- graphs. From 2010 onwards the values of the exogenous variables are held con- stant to the values of the year 2000. However there are some exceptions and some points deserve a comment:

• Population structure: The main driving force of the model over the 21st century is the evolution of the population structure, since the predictions of the United Nations Population Projections last until 2050. Thus, as said above, the growth rate of the first cohort and the probabilities of being alive are calibrated until 2050.

• Education: The proportion of high-skilled individuals among each new

generation is held constant from 2000 onwards. As young cohorts are more educated than older cohorts (or in other words, cohorts born before 2000 are less educated than those born in 2000 and after), it implies that the propor- tion of educated workers continues to increase after 2000. In the long run, the proportion of educated individuals will equal the proportion of educated among the cohort born in 2000.

• Pension systems: In line with the policies conducted in many developed

countries, we consider that pension systems will be less generous in the near future because of population aging. To represent these anticipated forthcoming pensions reforms, our baseline scenario for the first half of the

21st century accounts for two changes compared to the year 2000. First, between 2000 and 2040, the retirement age is gradually postponed by 1/4 year for both low- and high-skilled individuals, meaning that the retirement age for low- and high-skilled increases from respectively 60 and 62 in 2000 to respectively 61 and 63 in 2040. Formally, for the age group 55-64, λl

5 (respectively λh5) passes steadily from 0.5 to 0.6 (respectively from 0.7 to 0.8) over the period 2000-2040 in Japan, Western Europe and North Amer- ica. Second, the replacement rate of developed regions is reduced implying lower pension benefits in the next decades. Between 2000 and 2050, the re- placement rate in North-America is gradually reduced from 41.5% to 36%, the one in Western Europe from 42.5% to 37% and one in Japan from 27.5% to 22%.

• Harrod neutral technical progress: In the baseline scenario, the distance

of the Harrod neutral technical progress of each region to the technical progress of the leading economy (A/AN AM_{) is assumed to be constant af-} ter 2000. Our baseline accounts however for a catch-up of China, India and Eastern Europe to North America. This would be in line with the recent ac- cession of the majority of the Eastern European countries to the European Union and with the last years’ increased growth pace of India and China. Likewise the assumptions of the Ingenue (2005), the Eastern Countries will have increased their technology level by 25% in 2100 compared to North America, while both the Chinese and Indian regions will have doubled it by 2100.

Technology

The path of the so obtained labor-augmenting technical progress is depicted in figure 1.1. North America is the leader at the beginning of the second half of the 20thcentury and is ahead all along the 21stcentury.8 _{The technology levels of}

Japan and Western Europe are respectively at 99% and 96% of the one of North America from 2000 onwards. The drop in the productivity level of the Russian world after 1990 is explained by the fall of communism, while the Chinese and Indian worlds see their technology improved. Moreover, due to our convergence assumptions, the technology levels in the Eastern countries and in the Chinese and Indian worlds continue to rise after 2000 while the ones of all the other regions remain fixed at their 2000 level.

Demographic evolution of each region

Figure 1.2 describes the evolution of the support ratio, defined as the num- ber of individuals of working age for one pensioner, over the period 1960-2050.

This ratio decreases in the long-run for all the regions, but at a different pace for each region, because the aging process is not synchronous among regions. Nev- ertheless there are some similarities for some regions. For almost all of them, the support ratio strongly declines between 1980 and 2050. The exception is Sub- Saharan Africa where the support ratio only mildly diminishes between 1980 and 2020, then weakly recovers until 2040 and starts to drop at mid-century.

Figure 1.1: Evolution of labor-augmenting technical progress

Moreover, we can distinguish two groups of regions according to their aging pattern. In the first group, the Russian World, the Eastern Countries and the three developed regions with North America, Western Europe and Japan reached a low support ratio by the end of the 20th century, with less than 8 people of working age for one pensioner in 1980. Due to a huge decline in fertility after World War II, Japan is the fastest aging region and has the lowest number of working aged relative to elderly from 2000 onwards. The second group of regions comprises the other five regions and is aging at a slower pace than the first group. These regions start the 21stcentury with more than 11 individuals of working age for one pensioner, but have to cope with a very strong fall in their support ratios during the 21st century, which makes them slowly converge to the levels of the first group. Among these regions, the Chinese world will age most rapidly, as a consequence of its ‘one child’ policy. From 2050 onwards, the size of the youngest cohort in each region is assumed to be constant implying that support ratios stabilize after 2100.

Figure 1.2: Support ratio (ratio of working aged to pensioners)

Figure 1.3: Annual growth rate in the working age population (15-64)

Figure 1.3 depicts the annual growth rate in the working age population, which is declining by the end of the 20th century in all the regions. One exception

is the growth rate in the 15-64 age group of Sub-Saharan Africa, which rises until 2010 and falls afterwards but at a slower pace than the one of other regions. Moreover since its growth rate is always positive, the working age population in Sub-Saharan Africa is increasing all along the21st_{century. Besides Sub-Saharan} Africa, some other regions have see their working age population grow during the first half of the 21stcentury: the Middle East and North African region, the Indian world, Latin America and North America. North America is the only developed region that does not experience a reduction in its working age population, mainly because of immigration. In 1990, the Chinese world has the highest growth rate in the working age population after Sub-Saharan Africa, but afterwards the growth rate in the 15 to 64 years old individuals declines and becomes negative in 2040. In the other regions, i.e. Western Europe, the Russian world, the Eastern countries and Japan, the working age population decreases during most of the first half of the 21stcentury. Finally, as the size of the youngest cohort is assumed to be stable from 2050 onwards, the growth rates in the working age population of each region start converging in the second half of the 21st century and the size of the 15-64 age group becomes constant in each region from 2100 onwards.