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The Impact of Ageing on Demand, Factor Markets and Growth

Author

Listed:
  • Joaquim Oliveira Martins
  • Frédéric Gonand
  • Pablo Antolín
  • Christine de la Maisonneuve
  • Kwang-Yeol Yoo

Abstract

This paper examines the channels through which ageing will shape the main economic factors that in turn affect potential growth; identifies current policy settings that may in fact amplify the adverse impact of demographic trends; and sets out policy reforms that will work to temper the effects of ageing on growth. The paper begins with a brief discussion of demographic issues. The analysis first focuses on the impact of these trends on the future level and structure of consumption, which may affect aggregate saving and the structure of the economy, respectively. Then, it explores the main channels through which ageing affects the supply side of the economy following a production function approach: capital markets, labour markets and productivity. The empirical analysis focuses on a subset of large OECD countries with differing ageing patterns and generosity of pension systems. Using a simple general equilibrium overlapping generations model and considering alternative reform scenarios, some illustrative simulations are presented decomposing the effects of ageing on potential GDP per capita growth and economic convergence within OECD countries. Effets du vieillissement sur la demande, les marchés des facteurs de production et la croissance Cette étude examine les canaux par lesquels le vieillissement de la population est susceptible d'affecter l'économie et la croissance potentielle. Elle identifie les dispositifs actuels qui pourraient amplifier les effets négatifs induits par les tendances démographiques et analyse les réformes pouvant limiter ces effets. L'étude commence par une brève discussion relative aux évolutions démographiques. Leur effet sur le niveau et la structure de la consommation est ensuite analysé, ainsi que leur impact sur le niveau d'épargne agrégé et la structure de l'économie. L'effet sur l'offre est analysé suivant une approche de type fonction de production: marchés des capitaux, du travail et productivité. L'analyse empirique se concentre sur un sousensemble de grands pays de l'OCDE qui diffèrent par leurs profils de vieillissement et par la générosité de leurs systèmes de pension. Utilisant un modèle simple d'équilibre général avec des générations imbriquées et des scénarios alternatifs de réforme, l'étude présente des simulations illustrant l'impact du vieillissement sur le PIB potentiel par tête et la convergence économique entre pays de l'OCDE.

Suggested Citation

  • Joaquim Oliveira Martins & Frédéric Gonand & Pablo Antolín & Christine de la Maisonneuve & Kwang-Yeol Yoo, 2005. "The Impact of Ageing on Demand, Factor Markets and Growth," OECD Economics Department Working Papers 420, OECD Publishing.
  • Handle: RePEc:oec:ecoaaa:420-en
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    File URL: http://dx.doi.org/10.1787/545827207132
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    Keywords

    ageing populations; convergence économique; economic convergence; longevity; longévité; modèle à générations imbriquées; old workers; overlapping generation model; pension reform; réforme des systèmes de pensions; travailleurs âgés; vieillissement de la population;

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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