1887

OECD Economics Department Working Papers

Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.

The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.

English, French

The Impact of Ageing on Demand, Factor Markets and Growth

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.

English

Keywords: economic convergence, pension reform, longevity, overlapping generation model, old workers, ageing populations
JEL: C68: Mathematical and Quantitative Methods / Mathematical Methods; Programming Models; Mathematical and Simulation Modeling / Computable General Equilibrium Models; G10: Financial Economics / General Financial Markets / General Financial Markets: General (includes Measurement and Data); J11: Labor and Demographic Economics / Demographic Economics / Demographic Trends, Macroeconomic Effects, and Forecasts; D91: Microeconomics / Micro-Based Behavioral Economics / Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making; J26: Labor and Demographic Economics / Demand and Supply of Labor / Retirement; Retirement Policies
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