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The effect of changes in demographic structure on medium-run trends of key macroeconomic variables is estimated using a Panel VAR of 21 OECD economies. The panel data variability assists the identification of direct effects of demographics, while the dynamic structure uncovers long-term effects. Young and old dependants are found to have a negative impact while workers contribute positively. We propose a theoretical model, highlighting the relationship between demographics, innovation and growth, whose simulations match our empirical findings. The current trend of population aging and reduced fertility is found to reduce output growth and real interest rates across OECD countries.JEL Codes: E32, J11

We estimate the effect of changes in demographic structure on long-term trends of key macroeconomic variables using a panel VAR for 21 OECD economies from 1970 –2014. The panel data variation assists the identification of demographic effects, while the dynamic structure, incorporating multiple channels of influence, uncovers long-term effects. We propose a theoretical model, relating demographics, innovation, and growth, whose simulations match our empirical findings. The current trend of population aging and low fertility is projected to reduce output growth, investment, and real interest rates across OECD countries. (JEL E22, E23, E32, E43, J11, J13)

This paper analyses the level of inequality in Spain and how it evolved over the course of the past crisis and the early stages of the current recovery. To this end, it first introduces the various dimensions of wage, income, consumption and wealth inequality, and studies how they have developed. The analysis shows less wage dispersion in Spain than in other comparable economies, even after the crisis years, while the surge in unemployment during the period resulted in a high level of inequality in per capita income. The level of inequality in Spain is more moderate when total gross household income is analysed, decreasing during the crisis as a result of pensions developing more favourably than other sources of income, in conjunction with young people delaying setting up home. Inequality in per capita consumption rose during the crisis, particularly as a result of a decrease in expenditure on consumer durables by low-income households. Wealth inequality exceeds income inequality and increased during the downturn as a result of financial assets outperforming real assets. Nevertheless, Spain's wealth inequality is moderate by international standards, as ownership of real assets is more widespread than in other countries. The way inequality has evolved during the early stages of the current economic recovery shows that falling unemployment has enabled a reduction in wage income inequality, as well as in per capita income inequality, albeit to a lesser extent. We are indebted to all seminar participants at the Banco de España in particular to Óscar Arce and Pablo Hernández de Cos. We are very grateful to Virginia Sánchez Marcos and Manuel Bagues for their work in improving the paper during the editorial process. We also thank the assistance of Sandra Laza, Ana Valentina Regil, Maria Beiro and the translation and editing unit at the Banco de España. The opinions and analyses are the responsibility of the authors and, therefore, do not necessarily coincide with those of the Banco de España or the Eurosystem.