Page 63 - IJPS-11-1

International Journal of
Population Studies Macroeconomic factors and housing dynamics

technological growth reduces housing prices, indicating improvements reduce construction costs and influence
that long-term house prices are more influenced by supply house prices, investing in technological advancements and
than demand, assuming wages remain unchanged. This promoting a flexible housing supply can benefit overall
stability is likely because construction firms can anticipate social welfare. During economic expansions, rising wages
and adjust to demand changes driven by demographic can reduce household savings and increase interest rates,
shifts, stabilizing prices. Conversely, technological so policies that encourage balanced consumption, such as
advancements lower construction costs, leading to price tax incentives for savings and support for retirement plans,
changes. Demographic changes also affect interest rates are essential for maintaining economic stability.
and social security benefits. A 1% population decrease, or
a 5-year early retirement reduces interest rates by 9% and 5. Conclusions
18%, respectively, causing households to save more, which In this study, we constructed a general equilibrium model
creates an imbalance between savings and capital demand, with an endogenous housing market to study the effects
leading to a GDP decline. Social security payments of demographic changes, technological development,
increase by 25% and 30%, prompting households to invest and retirement policy reform on the housing market
a larger share of their wealth in housing assets (increases by and social security benefits. In this framework, variables
2% and 4%, respectively), indicating a more conservative such as house price, interest rate, wage, and labor flow
saving approach during downturns. are endogenous and determined by market conditions. In
During economic booms, rising productivity in both addition, we explored the impact of demographic shifts and
sectors leads to lower house prices and higher wages, TFP growth on macroeconomic outcomes and household
boosting consumption of both durable and non-durable lifetime profiles. The key findings include that housing
goods, with non-durable goods consumption growing prices are mainly driven by supply-side factors rather than
faster. Increased wages also raise social security payments, demand. Demographic changes significantly impact social
reducing the incentive to save. The capital-output ratio security payments, with lower future income prompting
drops by nearly 10%, and interest rates rise, reflecting households to increase their savings and housing assets,
increased capital demand as businesses expand. Over time, leading to a decrease in interest rates.
the share of real estate in total wealth decreases, and labor However, this paper has several limitations that could
shifts from construction to non-durable goods production, inspire future research. First, the model does not consider
reflecting employment trends during economic expansions. the renter’s problem and lacks the examination of aggregate
The findings reveal that demographic changes, such shocks, which may limit the realism and applicability of the
as population decline and early retirement, significantly results. Future research could examine how demographic
affect social security benefits and interest rates but have shocks, such as a baby boom or unexpected immigration
little impact on equilibrium house prices due to a perfectly increases, impact house prices and social security. The
elastic housing supply. This suggests that while aggregate assumption of unlimited land supply limits its applicability,
demand may decrease, house prices remain stable because and future models could incorporate the relationship
supply adjusts accordingly. To stabilize the housing market, between land prices and population changes. Moreover, this
governments could implement policies such as affordability life-cycle framework could be adapted to address various
programs or encourage flexibility in housing supply. To policy issues, such as monetary policy, fiscal policy, or
counter the decline in social security benefits and lower retirement policies. For example, introducing an Individual
interest rates, reforms could include automatic benefit Retirement Account plan instead of the PAYG system could
adjustments based on demographic trends, exploring influence household savings and consumption behavior.
alternative funding mechanisms such as investing in Acknowledgments
profitable portfolios, postponing the retirement age, or
providing subsidies for technological improvements. None.
In addition, labor shortages from demographic shifts Funding
may require targeted policies to sustain economic growth
and stabilize wages. Promoting workforce participation This work was supported by the Postgraduate Research
among older individuals can be achieved through flexible and Practice Innovation Program of Jiangsu Province
retirement policies, incentives for delayed retirement, (KYCX24_3354).
and part-time or flexible work options. Enhancing skills Conflict of interest
development through lifelong learning, vocational training,
and re-skilling initiatives is also crucial. As productivity The authors declare that they have no competing interests.

Volume 11 Issue 1 (2025) 57 https://doi.org/10.36922/ijps.3645