This paper focuses on the effect that population ageing has on the production structure of the economy and consequently on economic growth. We consider an economy that consists of a service sector and a commodity sector. Productivity growth only occurs in the latter sector and is assumed to depend positively on its size. We show that if old agents mainly demand labour-intensive services, the effect of increasing longevity on growth depends on the substitutability of labour and capital in a closed economy. However, ageing unambiguously decreases long-run growth in a small open economy.JEL classification: D91, E60, H55, J14, O41.
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