In the article “Japan’s population problem” in The Japan Time, Hugh Cortazzi write:
Japanese leaders and Japanese people generally are well aware of their nation’s demographic challenges. The population has begun to decline […] The implications for the Japanese economy and for Japan’s position in the world should be obvious.
I can see some “intuitive” reason why a decline in population would be an issue for a country, mostly if it comes with a decline in the workforce (roughly decreased labor supply, decreased international competitveness and problems with funding pension system?). But I am interested in more careful and more general analysis.
My questions are:
- What are (if any) the economic challenges of a declining population, in the case of Japan (or in general,if not too broad)?
- Does there exist modern macroeconomic models (say open economy DSGE) including demographics and studying declining populations ?
- Have some paper tried to compare the welfare costs of a declining population with the potential welfare benefits of a declining population (e.g. for a dense country like Japan, decreasing housing prices)?