Abstract
This paper uses an interregional CGE-Population model of Korea to estimate the regional effects of population ageing on the economic losses from 2015 to 2060. The model accounts for the economic behavior of producers and consumers on the real side economies of two regions: the Seoul Metropolitan Area and the rest of Korea. Population demographics are disaggregated into eight age cohorts, and each age group has different parameters and values for labor productivity and participation rates in the labor market on the supply side and saving rates and consumption behaviors on the demand side. The ageing trend could cause a reduction in the GDP by 0.92% on average, but the damage could be compensated for through an additional increase in educational investments in the 20–29 age cohort by 4% for at least 10 consecutive years. However, the investment policy has a negative impact on the regional income distribution due to different elasticity values of education by age cohort with respect to human capital productivity.
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