ABSTRACT
PIP: This article provides a very simplified analysis of the impact of changes in unemployment, retirement age, and fertility on economic dependency and per capita income in Latin America. The macroeconomic consequences of variations in age structure have received a little recent attention among Latin American researchers and policymakers, partly because of the lack of simple but rigorous analytical models to orient research. This analysis is simplified in that it focuses on changes in age distribution but does not explicitly consider effects of changes in population size, even though in reality the 2 types of changes are interrelated. The analysis has also been simplified by not taking into account any type of causal interaction between the demographic and economic variables analyzed; only the most elementary accounting relations between them are utilized. The 1st section defines the concept of economic dependency, specifies the effects of changes in its demographic and economic components, and establishes a simple link between the dependency ratio and per capita income. These and other derivations in the following sections permit evaluation of the impact of changes in employment, retirement age, and fertility on the dependency ratio and per capita income. The work concludes with a synthesis and general discussion, including a theoretical consideration of the effects of interactions among components. Only the most important equations are presented in the main text, but all variables, equations, and relations are defined and derived in the appendix. 6 countries were studied to illustrate the relationships in the context of the demographic diversity of Latin America. Argentina and Cuba represented countries in an advanced stage of the demographic transition, Chile and Mexico represented an intermediate phase, and Bolivia and Peru represented countries at the beginning of the transition. Results of decomposition of changes in dependency and income due to each of the factors showed substantial variation between countries in regard to changes in unemployment and fertility, but much less variation in regard to changes in retirement age. A 50% decline in unemployment would have comparatively moderate effects and would increase per capita income by 1-6.5%. Shortterm impacts of fertility decline would be greater, and would vary between 1-8.5%, while an increase of 2 years in the retirement age would produce more uniform increments fluctuating between 6-8%. The analysis indicates that few Latin American countries have reached the stage where small fertility reductions would be detrimental to their dependency burden or per capita income. Some countries with slow growth like Argentina are gradually approaching the stage when efforts of demographic aging will be more important.^ieng