In this paper we study the implications of population ageing in an economy with a sizeable non-traded goods sector. To this effect a highly stylized micro-founded macro model is constructed in which the age structure of the population plays a non-trivial role. The model distinguishes separate birth and death probabilities (thus allowing for net population change), allows for age-dependent labour productivity (thus mimicing life-cycle saving), and includes a rudimentary pension system (thus allowing for intergenerational redistribution). The model is used to analytically study demographic and pension shocks.

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Journal of Economic Dynamics and Control
Erasmus School of Economics

Bettendorf, L., & Heijdra, B. (2006). Population ageing and pension reform in a small open economy with non-traded goods. Journal of Economic Dynamics and Control, 30(12), 2389–2424. doi:10.1016/j.jedc.2005.08.001