Serving the old: ageing and economic growth

Bas van Groezen, Lex Meijdam and Harrie A. A. Verbon

Oxford Economic Papers, 2005, vol. 57, issue 4, 647-663

Abstract: This paper focuses on the effect that population ageing has on the production structure of the economy and consequently on economic growth. We consider an economy that consists of a service sector and a commodity sector. Productivity growth only occurs in the latter sector and is assumed to depend positively on its size. We show that if old agents mainly demand labour-intensive services, the effect of increasing longevity on growth depends on the substitutability of labour and capital in a closed economy. However, ageing unambiguously decreases long-run growth in a small open economy. Copyright 2005, Oxford University Press.

Date: 2005
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