Scotland the Grey: A Linked Demographic-CGE Analysis of the Impact of Population Ageing and Decline

Abstract

This paper links a multi-period economic Computable General Equilibrium (CGE) modelling framework with a demographic model to analyse the economic impact on Scotland of its projected ageing and declining population. The model quantifies the effect on aggregate economic variables, such as GDP, employment and competitiveness, and also on individual sectors. With the principal demographic projections, the fall in population, and particularly working-age population, has a depressing impact on economic activity. By changing the demographic parameters, we track the impact of increasing net migration, a policy actively being pursued by the Scottish Executive. However, the required size of the annual net-migration needed to neutralise the adverse natural demographic changes is far higher than the current trends.