15 Apr 2016

Measuring Dependency Ratios using National Transfer Accounts

Mikkel Barslund / Marten von Werder

Download Publication


It is now widely recognised that traditional demographic dependency ratios (DDRs), such as the old-age dependency ratio relating the number of people aged 65+ to the working-age population, provide a poor measure of the socio-economic changes that ageing societies will bring about. In the future, older generations will have increasingly better health and are likely to work longer. By combining population projections and National Transfer Accounts (NTA) data for seven European countries, we project the quantitative impact of ageing on public finances until 2040 and compare it to projected DDRs. We then simulate the public finance impact of changes in three key indicators related to the policy responses to population ageing – net immigration, healthy ageing and longer working lives – by linking age-specific public-health transfers and labour-market participation rates to changes in mortality. Four main findings emerge: first, the simple old-age dependency ratio overestimates the future public finance challenges faced by the countries studied – significantly so for some countries, e.g. Austria, Finland and Hungary. Second, healthy ageing has a modest effect (on public finances) except in the case of Sweden, where it is substantial. Third, the long-run effect of immigration is well captured by the simple DDR measure if immigrants are similar to the native population. Finally, increasing the length of working lives is central to addressing the public finance challenge of ageing. Extending the length of working lives by three to four years over the next 25 years – equivalent to the increase in life expectancy – severely limits the impact of ageing on public transfers.

Mikkel Barslund is a Research Fellow at CEPS and Marten von Werder is a Researcher at the Freie Universität Berlin.

Related Publications

Browse through the list of related publications.

Multi-Layered Actions?

Sustaining Partnerships in the EU Integrated Approach to Conflicts and Crises

The Recovery and Resilience Facility

A springboard for a renaissance of public investments in Europe?

Limitations on Human Mobility in Response to COVID-19

A preliminary mapping and assessment of national and EU policy measures, their sanctioning frameworks, implementation tools and enforcement practices

Central bank digital currencies

Can central banks succeed in the marketplace for digital monies?

EU defence projects

Balancing Member States, money and management

Between politics and inconvenient evidence

Assessing the Renewed EU Action Plan against migrant smuggling