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Inter-temporal and Inter-Industry Effects of Population Ageing: A General Equilibrium Assessment for Canada

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  • Annabi, Nabil
  • Fougère, Maxime
  • Harvey, Simon

Abstract

The objective of this paper is to examine the inter-industry and labour market occupational effects of population ageing in Canada, using a computable general equilibrium overlapping-generations model. The model is calibrated along a balanced-growth path, taking into account labour-augmenting (Harrod-neutral) technical progress. It also accounts for heterogeneity at the household level, using 25 occupation-specific earnings profiles. In addition to the impact of slower labour force growth, the model captures the shift in sectoral composition of final demand. The latter is due to different consumption preferences of older individuals. Moreover, a wage curve is introduced to explore the impact of population ageing on the unemployment rate. The simulation results indicate that the growth in real GDP per capita could decline by nearly one percentage point between 2006 and 2050. Besides, the production of services, in percent of total GDP, is projected to increase in the long-run, although the analysis shows more modest changes in production shares than in previous studies. The results also suggest that the equilibrium unemployment rate is likely to decline by more than 2 percentage points in the long run. The impact also varies quite significantly at the occupational level.

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File URL: http://www.clsrn.econ.ubc.ca/workingpapers/CLSRN%20Working%20Paper%20no.%2036%20-%20Annabi-Fougere-Harvey.pdf
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Bibliographic Info

Paper provided by Vancouver School of Economics in its series CLSSRN working papers with number clsrn_admin-2009-44.

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Length: 43 pages
Date of creation: 22 Jul 2009
Date of revision: 22 Jul 2009
Handle: RePEc:ubc:clssrn:clsrn_admin-2009-44

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Web page: http://www.clsrn.econ.ubc.ca/

Related research

Keywords: Population ageing; growth; general equilibrium model; overlapping generations; Canada;

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References

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  1. David G. Blanchflower & Andrew J. Oswald, 1995. "An Introduction to the Wage Curve," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 153-167, Summer.
  2. Frank T Denton & Christine H Feaver & Byron G Spencer, 2005. "Population Aging in Canada: Software for Exploring the Implications for the Labour Force and the Productive Capacity of the Economy," Social and Economic Dimensions of an Aging Population Research Papers 146, McMaster University.
  3. David Card, 1995. "The Wage Curve: A Review," Working Papers 722, Princeton University, Department of Economics, Industrial Relations Section..
  4. Fougere, Maxime & Mercenier, Jean & Merette, Marcel, 2007. "A sectoral and occupational analysis of population ageing in Canada using a dynamic CGE overlapping generations model," Economic Modelling, Elsevier, vol. 24(4), pages 690-711, July.
  5. Turalay Kenc & William Perraudin, 1996. "Pension Systems in Europe: A General Equilibrium Study," Archive Working Papers 018, Birkbeck, Department of Economics, Mathematics & Statistics.
  6. J.H.L. Dewhurst, 2006. "Estimating The Effect Of Projected Household Composition Change On Production In Scotland," Dundee Discussion Papers in Economics 186, Economic Studies, University of Dundee.
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Cited by:
  1. Annabi, Nabil & Harvey, Simon & Lan, Yu, 2011. "Public expenditures on education, human capital and growth in Canada: An OLG model analysis," Journal of Policy Modeling, Elsevier, vol. 33(6), pages 852-865.

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