Basic Report

Reduction in the fraction of the working-age population by falling rate of labor force may be become one of the reasons to make economy grow more slowly. The difficulty of obtaining job, the increase of life expectancy, and mobility toward bigger regions are emerged as social problems in global age structure, and Korea is not free to be exception. These changes reflect that too few people to produce the goods and services that people want to consume, while most of people including young and old generation need more goods and services. Therefore, low employment rate, high rate of the old, and migration toward bigger region play a role to cease to grow economy in the regional and macro level.
   Generally, increasing longevity caused change in population age distribution (Lee, 2003), and change of labor force which is caused by population change affects to the economic growth. Therefore, just defining change of labor force as the change in whole labor force is not proper to explain how much change of labor force affects to the economic growth, since the changes in labor force are brought from different sources. Heijdra and Romp (2006) also supported this as suggesting that there were many sources to determine a unique path as considering the population changes.
   Regarding ageing, life expectation is growing more than before. Ageing is not independent with fertility, mortality, and migration, because population growth of ageing is affected by low fertility and mortality, and high migration. Therefore, the increase of ageing population is considered as a one kind of critical results of low fertility because individuals live longer and tend to have fewer children. The decline of labor force will increase the working age share because the number of youth dependents falls with the number of working age individual increases. Increase of ageing will affect to the decline of working age, because old age will act as a dependent to the working ratio. This growing ageing is typical fashion of both region and nation. Therefore, it cannot be hard to express that shortage of youth and increment of old age have a mutual relation each other. But, other factors, such as spending more to medical treatments and services in order to sustain and extend their health condition better, should have to be considered. The impact of ageing to the economy is not solely dependent on the change of the number of ageing. Because, growing trend of ageing affects to the economy may have both perspectives, positive and negative. Therefore, transitory changes due to population variation lead to changes of saving, and consumption behaviors and along with population and labor supply decision by government policy. These economic symptoms are easily found in the Ludwig (2005) that magnitude of demographic changes will affect future labor, capital and consumption goods markets. Therefore, finding the effects of ageing by increasing medical consumption in the regional level on the regional economy are worthy to receive much more attention. The decline in fertility rates and the increase in life expectancy were regarded as current demographic trends and it has an economic impact on growth. Ageing is a one kind of phenomenon to bring change of demographic structure. Combine ageing with growth model, which will drive change of population along the growth path.
   As mentioned above, increased longevity led to population ageing especially in the developed countries and it caused how increasing concerns about ageing has impact on economy. However, many of issues raised from above former literature, the effect of ageing by medical industry have received scant attention, even Korea faced difficulties to obtain medical data, especially in the industry perspective. Also, it is already shown in the many previous studies that medical consumption and ageing has deep and bidirectional relationship, but it is not easy how their relationship has economic effects to the regional economy. Therefore, this study examines the role and effect of change of medical consumption and ageing, which seldom made explicit, with estimating the effect on macroeconomic factors by panel simultaneous equations empirically. Setting up panel simultaneous equations are based on theoretical overlapping generation model, which is helpful to find general equilibrium across generations, and it can show how trend of ageing of each cohort affects to the generations through macroeconomy.
   As considering suggestion from the previous studies, section two reviews theoretical approach to ageing and similar issues regarding regional economics and medical consumption, and methodologies which are frequently used in ageing field. Section three turns into empirical approach that suggests current situation faced ageing in Korea which may cause change of economic growth by the persistent trend of ageing, along with general perspective of ageing regarding finding. Also, it shows data, descriptive statistics for the empirical analysis, empirical model background, model, and empirical results. Empirical models are separated to show methodologies, significance test, and empirical results of panel simultaneous equations. And, simulations, which are taken by key variables, shows scenario and ex-post and ex-ante which are based on the empirical results. Section four provided conclusions and implications through conducting empirical analysis, and suggested the overall results of economic effects on regional and macroeconomic growth along with further issues.