Economic Impacts of Aging Populations in Developed Countries
You have studied the theoretical issues of asymmetric information – situations where one party in a transaction knows more than the other. You understand the problems that can follow from not knowing who you are dealing with or what they are doing. Markets can collapse; prices can be skewed; individuals can’t reach the best outcomes for themselves. Now turn your attention to a real-world problem of asymmetric information. Identify a situation where moral hazard or adverse selection can be a problem. Look at how the problem has been analyzed in two (2) academic research papers. Pull your research together to write a summary paper that explains your issue and how economists have studied it. Describe your problem, explain the informational asymmetry, and review and evaluate the research papers you have found. In your paper
• Describe the real-world problem.
• Explain the informational asymmetry.
• Discuss how the problem has been studied in two (2) research papers.
• Answer the so what? who cares? questions:
o What was learned from these studies?
• Conclude with your thoughts on what should happen next.
o Were solutions suggested that you think should be implemented?
o Are there additional questions researchers should investigate?
Be sure to cite all your references carefully and correctly.
Length: 5-6 pages.
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Economic Impacts of Aging Populations in Developed Countries
Over the years, especially in the 20th century, most developed countries noticed a gradual increase in life expectancy and declined fertility. Countries such as Japan, China, Germany, and South Korea have continued and are expected to be an aging population due to these high life expectancies and decreasing mortality rates. Unfortunately, these factors have made numerous individuals worry about an aging population's economic effects. While most of these developed nations have the policy set aside to address issues of the aged population, there are existing issues that the issue continues to pose to the economy. Declined working-age population, unmanageable pension commitments, declining healthcare costs, and altering demand drivers are some of the few economic impacts of the aging population. As a result, this paper focuses on analyzing detailed information concerning how the aging population threatens the economic well-being of developed countries and its links with asymmetric information.
The imbalance between negotiating parties regarding knowledge of the necessary details and factors causes information asymmetry. The imbalance indicates that the side with more information has better advantages than the other party. On the other hand, the asymmetric information is responsible for adverse selection. The adverse selection demonstrates the situation where one party has more significant information than the other party. The aging population in several countries has been causing numerous connected and unconnected problems, such as global integration, security threats, and pension provision (Kar and Saha 1). Similarly, a country with a more aged population in the labor market in terms of productivity is disadvantaged by those nations with more youths. The reason is that youths are familiar with and more comfortable using current technology than aged workers. Moreover, a country with a more aged population in the labor market in terms of productivity is disadvantaged by those nations with more youths. The reason is that youths are familiar with and more comfortable using current technology than aged workers. Unfortunately, multiple types of research that study trends and consequences aspects of labor migration do not discuss the asymmetrical information in the transnational labor markets.
Asymmetric information in the labor market occurs where there is a lack of access and interpretability of evidence in quite an isolated labor market. The concern of asymmetric information is compelling if the employees are new in the labor market to ensure they gain information about productivity. The prevalence of asymmetric information mainly leads to statistical discrimination in the labor market. Asymmetric information in the labor market ignites several implications for firms and employees. Asymmetric information exists in the market where employers must know potential workers' productivity levels. For instance, an aged population may be aware that their productivity has declined because of their decreased familiarity with advanced technology, which impacts the country's competitive labor market.
In an aging country, the problem becomes widespread since the aging population of workers may lack the necessary skills due to technological advancement. As a result, employers in the aged market are less competitive compared to the developed nations full of youthful potential employees. In adverse selection, sellers have more information than buyers, which disadvantages the customers during a transaction. Generally, the cause of moral hazard and adverse selection causes asymmetric information between the buyer and seller, contributing to a risky problem for the operation of the voluntary health insurance market. Health insurance offers an example of a market entailing an adverse selection.
However, there is little research put in place that adverse selection and the issue is a key issue in health insurance. The health-insurance markets are stable where the equilibrium may be characterized by great health risks purchasing full insurance. The insurance market will likely be impacted by the labor market as individuals will likely have more knowledge about their skills than insurers. Thus, inefficiencies in this healthcare market are crucial because some of the population may be uninsured. Large employees can alleviate adverse selection by risk pooling.
Additionally, aging populations have more healthcare needs than youths, causing many finances to be allocated for their health necessities. These funds could have instead been in the labor market to fuel improved production. Therefore, governments of aged population countries should find ways to manage the aging population as soon as possible. The government can achieve this by first analyzing the economic impacts of the aging population in developed countries. Afterward, they should develop all possible solutions to address the impacts.
A study, “The economic consequences of aging populations” by Mc Morrow and Roeger, aimed at analyzing the economic consequences of aging populations comparing the European Union (EU), United States (US), and Japan. The paper asserts that surging life expectancy and declining fertility rates are the main reasons behind the increased number of the older population. The population of older people is also projected to rise gradually by the end of 2050. The findings show that the aging population will increase expenditure pressure on the public...