Age & Rising Nationalism

World Bank economist Harun Onder has a post over at the Brookings Institution on his brand new study on rising nationalism and older generations:

Much ink has been spilled against such premises of rising nationalism. But a curious observation remains to be explained: Why do nationalist arguments tend to resonate with old people? Take the recent case of Brexit. Only a quarter of youth (ages 18-24) voted for the “leave” camp. In comparison, six out of ten old people (ages 65+) wanted to leave. The youth were quick to announce the stark contrast in social media and clarify their position! So, what is it that the old know about globalization that the young fail to see?

In a recent study, my colleagues Richard Chisik and Dhimitri Qirjo and I tried to explain how demographic aging—an increase in the share of old people in the country—could shift the economic policy preferences in an economy. Because nationalist sentiments often involve objections to free trade and migration, we paid particular attention to those policies. We came up with three interesting results that may help us understand how aging and nationalism are linked.

These results include:

  1. An aging population is more dependent on imports: “To see this, note that the old consume more services like long-term care and the young consume more goods like smartphones. Therefore, the higher the share of old people in the population, the higher the demand for services, which cannot be imported, and the lower the demand for goods that can be imported.”
  2. When aging occurs, more firms move overseas if trade barriers are low: “If…the aging country imposes egregiously high tariffs on imports, smartphone producers might rethink their relocation decisions.”
  3. Nationalists may have a point about free trade at first glance, but more in-depth analysis proves otherwise: “From the nationalist point of view, erecting barriers at the border, be it made of concrete or import tariffs, may appear to make sense economically. However, this logic is terribly shortsighted: It is based on a static view of a world where actions cause no reactions. More specifically, it fails to recognize that when one country erects barriers its partners will do the same in response. In the end, a trade war may be triggered, only to be accompanied by a rising wave of protectionism, which would hurt the aging country more than the partner.”

Check it out.