Population Ageing, Capital Intensity and Labour Productivity

18 Pages Posted: 6 Aug 2011

See all articles by Ross S. Guest

Ross S. Guest

Griffith University - School of Accounting and Finance - Gold Coast Campus

Date Written: August 2011

Abstract

This paper analyses the implications of population ageing for the capital intensity of output and, therefore, labour productivity. Population ageing leads to sectoral shifts in demand for goods and services. If such shifts occur between goods that differ in their capital intensity, there will be a change in the average capital intensity of the economy and, therefore, in average labour productivity. In order to gauge the magnitudes of such effects, the present paper reports simulations of a calibrated model with two final goods and two intermediate goods, using data for two Pacific Rim countries for comparison: the United States and Australia. The data for these countries suggest that population ageing will, on average, shift expenditure towards goods with a relatively high capital intensity. The magnitude of the increase in labour productivity according to the simulations is likely to be small, but perhaps not trivial: in the order of 1–4% per annum by 2050. This might partially offset the negative effect of ageing on living standards.

Suggested Citation

Guest, Ross, Population Ageing, Capital Intensity and Labour Productivity (August 2011). Pacific Economic Review, Vol. 16, Issue 3, pp. 371-388, 2011. Available at SSRN: https://ssrn.com/abstract=1905853 or http://dx.doi.org/10.1111/j.1468-0106.2011.00553.x

Ross Guest (Contact Author)

Griffith University - School of Accounting and Finance - Gold Coast Campus ( email )

PMB 50 Gold Coast Mail Centre
9726 Queensland
Australia

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