DP263 | The Economic Consequences of Population Ageing in Advanced Societies


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The aging of the populations of all developed nations over the next 40 years will have an important impact on welfare expenditure and labor supply. This paper uses aggregate data from IMF and OECD studies to examine the way in which income support for the elderly and the labor supply of older workers in developed countries is likely to be affected by demographic developments into the next century. A range of possible policy responses to the increased cost of an aging population is considered, and the paper concludes that the scope for reducing this cost by altering pension systems or increasing retirement age is slight; the most effective way of coping with the cost of an aging population is by ensuring that the long-run rate of economic growth is maximized.