Economic implications of an ageing population

Abstract

This thesis is a theoretical investigation of economic implications of population ageing of the sort experienced in Canada, Australia and the United States as a result of the post-war baby boom. It analyses distributional effects in the framework of Samuelson’s consumption-loan model, and uses simulation techniques to study the behavior of models containing several age groups. After a general discussion of the effects of population ageing the thesis considers the structure of the consumption-loan model and the form of the consumption functions to be used in the analysis that follows. We then undertake qualitative analysis of a small consumption-loan system, which provides insights into the behavior of the interest rate but is too small to display realistic demographic dynamics. From there we go to simulation analysis of larger systems, one a pure consumption-loan system in which age specific incomes are exogenous and the other a model in which age specific income is determined by a neoclassical production function with capital and several ages of labour as inputs. We run simulations on this last system using current projections of the Canadian population to the year 2026. The major conclusion of the thesis, demonstrated in the final simulations, is that the distributional effects of the post war baby boom operate against the baby boom cohorts not only when they reach the older years but through their entire working lives. Show more