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Inter-temporal and Inter-Industry Effects of Population Ageing: A General Equilibrium Assessment for Canada

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  • Annabi, Nabil
  • Fougère, Maxime
  • Harvey, Simon

Abstract

The objective of this paper is to examine the inter-industry and labour market occupational effects of population ageing in Canada, using a computable general equilibrium overlapping-generations model. The model is calibrated along a balanced-growth path, taking into account labour-augmenting (Harrod-neutral) technical progress. It also accounts for heterogeneity at the household level, using 25 occupation-specific earnings profiles. In addition to the impact of slower labour force growth, the model captures the shift in sectoral composition of final demand. The latter is due to different consumption preferences of older individuals. Moreover, a wage curve is introduced to explore the impact of population ageing on the unemployment rate. The simulation results indicate that the growth in real GDP per capita could decline by nearly one percentage point between 2006 and 2050. Besides, the production of services, in percent of total GDP, is projected to increase in the long-run, although the analysis shows more modest changes in production shares than in previous studies. The results also suggest that the equilibrium unemployment rate is likely to decline by more than 2 percentage points in the long run. The impact also varies quite significantly at the occupational level.

Suggested Citation

  • Annabi, Nabil & Fougère, Maxime & Harvey, Simon, 2009. "Inter-temporal and Inter-Industry Effects of Population Ageing: A General Equilibrium Assessment for Canada," CLSSRN working papers clsrn_admin-2009-44, Vancouver School of Economics, revised 22 Jul 2009.
    • Handle: RePEc:ubc:clssrn:clsrn_admin-2009-44
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    File URL: http://www.clsrn.econ.ubc.ca/workingpapers/CLSRN%20Working%20Paper%20no.%2036%20-%20Annabi-Fougere-Harvey.pdf
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    References listed on IDEAS

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    1. Turalay Kenc & William Perraudin, 1996. "Pension Systems in Europe: A General Equilibrium Study," Archive Working Papers 018, Birkbeck, Department of Economics, Mathematics & Statistics.
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    4. David Card, 1995. "The Wage Curve: A Review," Working Papers 722, Princeton University, Department of Economics, Industrial Relations Section..
    5. Frank T Denton & Christine H Feaver & Byron G Spencer, 2005. "Population Aging in Canada: Software for Exploring the Implications for the Labour Force and the Productive Capacity of the Economy," Social and Economic Dimensions of an Aging Population Research Papers 146, McMaster University.
    6. David Card, 1995. "The Wage Curve: A Review," Journal of Economic Literature, American Economic Association, vol. 33(2), pages 285-299, June.
    7. Antonio Ciccone & Giovanni Peri, 2005. "Long-Run Substitutability Between More and Less Educated Workers: Evidence from U.S. States, 1950-1990," The Review of Economics and Statistics, MIT Press, vol. 87(4), pages 652-663, November.
    8. Fougere, Maxime & Mercenier, Jean & Merette, Marcel, 2007. "A sectoral and occupational analysis of population ageing in Canada using a dynamic CGE overlapping generations model," Economic Modelling, Elsevier, vol. 24(4), pages 690-711, July.
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    Cited by:

    1. Johannes Berger & Thomas Davoine & Philip Schuster & Ludwig Strohner, 2016. "Cross-country differences in the contribution of future migration to old-age financing," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 23(6), pages 1160-1184, December.
    2. Annabi, Nabil & Harvey, Simon & Lan, Yu, 2011. "Public expenditures on education, human capital and growth in Canada: An OLG model analysis," Journal of Policy Modeling, Elsevier, vol. 33(6), pages 852-865.

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    More about this item

    Keywords

    Population ageing; growth; general equilibrium model; overlapping generations; Canada;
    All these keywords.

    JEL classification:

    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O51 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - U.S.; Canada

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