Demographics and the trade balance.

Abstract

A simulation model is used to examine the relationship between changes in the age compostition of the U.S. population and movements in the trade balance. The author finds that "recent and projected shifts in the age compostition of the U.S. population are capable of producing large swings in the trade balance. He concludes that much of the current trade deficit reflects mutually beneficial international exchange. To that extent, the deficit should not be interpreted as a sign that U.S. living standards will decline."