POPULATION AGING AND ECONOMIC DEPENDENCY RATIO: COMPARATIVE STUDY OF THE CZECH REPUBLIC AND SLOVAKIA

The article examines the effects of population aging on economic dependency ratio. The results are estimated using broader definition of economic dependency allowing for variability in employment rates of age- and gender-specific groups. The Czech Republic and Slovakia are used as case study countries with similar starting point to assess their comparative population dynamics. The results suggest a significant growth of dependent share of population. Dependency ratios are predicted to increase from 110 % in 2016 to 161 % in 2060 and from 120 % to 181 % for Czech and Slovak economy respectively. Decomposition of the indicator shows substantial old-age cohort contribution, which indicates increased pressure on fiscal stability due to population aging. In second stage, the sensitivity of economic dependency on employment rates is tested to model three policy reforms to tackle the increased dependency – increase in exit age from workforce, gender equalizing labour market reform and mobilization of young-age workers. The evidence suggests that a cumulative effect of simulated reforms has the ability to decrease predicted dependency ratios back to current levels