The regional impact of population ageing in Canada: a general equilibrium analysis

Abstract

This study explores the long-term economic effects of population ageing by region in Canada using a dynamic regional computable overlapping generations model. The model has six regions, six goods and 15 overlapping generations of heterogeneous workers by skill level and immigration status. The analysis indicates that regional differences in retirement decisions, fertility rates and location of skilled immigrants will cause a substantial increase in regional income disparity in Canada between faster-ageing and slower-ageing regions of the country.

Acknowledgements

The authors want to give a special thank to Jean Mercenier and Marcel Mérette for their help and expertise during the development phases of the OLG model.

Notes

¹ See United Nations (2003) for a cross-country comparison of projected demographic changes.

² Équipe Ingenue (2001), Group of Ten (1998) and Hviding and Mérette (1998) have also examined the potential consequences of ageing for several industrialized countries.

³ The elderly dependency ratio is defined as the population 65+ as a ratio of the 17–64 population.

⁴ Effective units of labour is an indicator which combines both the number of workers and its quality (experience and skills).

⁵All real GDPs per capita are normalised to one in 2002 and the regional GDP gap is measured as the percent change in regional GDP relative to the national level.