Expanding Product Variety and Human Capital Formation in an Ageing Economy

Abstract

Population ageing is a significant demographic phenomenon facing many countries. The present paper aims to ascertain the relationship between population ageing and macroeconomic performance, within the framework of an economic growth model endogenously incorporating innovation and human capital. Consequently, the present model implies that the rate of innovation and the ratio of skilled to unskilled workers would decline over the long run as populations aged further, because of increases in life expectancy. The present model also suggests that, in general, the effect of changes in the retirement age on the rate of innovation and the ratio of skilled to unskilled workers is inconclusive.