| Abstract: | With a particular focus upon long-term supply effects, the authors explored the implications of different population age distributions for the productive capacity of an economy. A multilevel aggregate production process was specified, plausible values assigned to its parameters, and steady-state solutions obtained under a range of alternative fertility assumptions. The theoretical model was calibrated to conform with Canadian data and published estimates of age-sex substitution elasticities. The study found productive capacity to be related to age distribution, although the output effects exceed 8%, regardless of the structure of the economy, only when total fertility rate is less than 1.6 or well above 3.0; within the range of variation, productive capacity and output per capita are lower for both younger and older populations; altering the elasticity of substitution between different tasks has negligible effects upon the sensitivity of the economy to changes in age distribution; altering the elasticity of substitution between different age-sex groups for a given task has a markedly greater effect; introducing either increasing or decreasing returns to scale has only a minor effect upon the sensitivity of the economy to changes in age distribution; and marginal products are quite sensitive to changes in age distribution for both younger and older workers, but far less sensitive for middle-aged workers. |
