Incentives and Product Variety in an Aging Economy

This paper presents a new method to clarify intergenerational effects of the demographic change in industrialized countries, i.e., the trend of aging. Recognized effects of aging are twofold; a disincentive effect and a product variety effect. The results are consistent with the empirical findings in Cutler et al. (1990). With the evidence, our model predicts that diminished fertility represents a problem rather than an opportunity, and that diminished mortality represents an opportunity rather than a problem.