Innovations in the macroeconomic modelling of population ageing

This paper applies several innovations in the modelling of population ageing. Particular attention is given to two of the innovations which address shortcomings of the standard models that affect the assessment of the impact of ageing on average labour productivity. One is the assumption that workers of different ages are perfectly substitutable, which is implied by the assumption that aggregate labour is an additive function of labour inputs by age. The other is the assumption that all goods have equal capital intensities in a steady state. Simulations are undertaken which suggest that these effects are probably not large, but possibly not trivial either.