Socio-Economic Impacts of Demographic Shifts on Family Structures: A Dynamic Computable General Equilibrium (CGE) Model

Abstract

The intersection of demographic transition and economic performance remains one of the most critical areas of inquiry in contemporary macroeconomics. As global populations age and fertility rates decline, the traditional family structure serves as the primary transmission mechanism for these shifts into the broader economy. This paper develops and applies a dynamic Computable General Equilibrium (CGE) model to analyze the socio-economic impacts of these demographic shifts, specifically focusing on the evolution of family structures as economic units. By integrating an Overlapping Generations (OLG) framework within the CGE architecture, we simulate the intertemporal decisions of households regarding consumption, savings, and labor supply under varying demographic scenarios. The model explicitly accounts for the heterogeneity of household compositions, ranging from nuclear families to multi-generational households, and examines how changing dependency ratios alter fiscal balances and factor prices. Our results indicate that the contraction of the working-age population necessitates a structural adjustment in capital-labor ratios, leading to increased pressure on public pension systems and a significant reallocation of resources within the family unit towards elder care. Furthermore, the analysis reveals that the economic burden of demographic aging is not evenly distributed, with single-parent households and lower-income extended families facing the highest welfare costs. The findings suggest that policy interventions must move beyond simple fiscal consolidation and address the structural rigidities inherent in modern family economics to mitigate the adverse effects of the demographic transition.