Sovereign Debt, Aging Populations, and Economic Growth : Differences between OECD and Less Developed Nations

This paper examines whether there is any linkage between high levels of sovereign debt and the size of the elderly population. It is primarily a descriptive study which utilizes simple correlations and regressions. One might expect, based on precepts of prudent management of finances, that nations with large populations of elderly would have lower sovereign debt relative to GDP. However, our results show that the opposite appears to be more prevalent among OECD nations. We find a positive and significant correlation between the percentage of people 65 and older and the sovereign debt/GDP ratio. On the other hand, there is no significant relationship among non-OECD countries which are generally less developed. We then analyze whether economic performance among countries is related to sovereign debt levels and measures of the elderly population. We find that economic growth tends to be lower in nations with a higher percentage of elderly. This statistically significant correlation applies to both OECD and non-OECD countries. A negative relationship also applied to sovereign debt burdens and economic growth. However, that negative correlation was significant only with the OECD nations