The Impact of Ageing on Demand, Factor Markets and Growth

100 Pages Posted: 6 Apr 2005

See all articles by Joaquim Oliveira Martins

Joaquim Oliveira Martins

OECD; University Paris-Dauphine - PSL

Frederic Gonand

Organization for Economic Co-Operation and Development (OECD)

Pablo Antolin

Organisation for Economic Cooperation and Development, OECD

Christine de la Maisonneuve

Organization for Economic Co-Operation and Development (OECD) - Economics Department (ECO)

Kwang-Yeol Yoo

Republic of Korea - Ministry of Finance and Economy

Date Written: March 29, 2005

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.

Keywords: Ageing populations, longevity, overlapping generation model, pension reforms, employability, old workers, economic convergence

JEL Classification: C68, D91, G10, J11, J26

Suggested Citation

Oliveira Martins, Joaquim and Gonand, Frederic and Antolin, Pablo and de la Maisonneuve, Christine and Yoo, Kwang-Yeol, The Impact of Ageing on Demand, Factor Markets and Growth (March 29, 2005). OECD Economics Department Working Paper No. 420. Available at SSRN: https://ssrn.com/abstract=700064 or http://dx.doi.org/10.2139/ssrn.700064

Joaquim Oliveira Martins (Contact Author)

OECD ( email )

2 Rue André Pascal
75775 Paris Cedex 16
France
+33 1 45 24 88 53 (Phone)

HOME PAGE: http://www.oecd.org/cfe

University Paris-Dauphine - PSL ( email )

PARIS
France

Frederic Gonand

Organization for Economic Co-Operation and Development (OECD) ( email )

2 rue Andre Pascal
Paris Cedex 16, 75775
France

Pablo Antolin

Organisation for Economic Cooperation and Development, OECD ( email )

2 rue Andre Pascal
Paris Cedex 16, MO 63108
France
33-1-45.24.90.86 (Phone)
33-1-44.30.63.08 (Fax)

Christine De la Maisonneuve

Organization for Economic Co-Operation and Development (OECD) - Economics Department (ECO) ( email )

2 rue Andre Pascal
Paris Cedex 16, MO 63108
France

Kwang-Yeol Yoo

Republic of Korea - Ministry of Finance and Economy ( email )

Government Complex II
Gwacheon, 427-7
Korea, Republic of (South Korea)

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