Population ageing, policy reforms and economic growth in JapanÅ: a computable OLG model with endogenous growth mechanism

We have developed a computable endogenous growth OLG model generated by the accumulation of human capital. To study whether policy reform against aging make any quantitative impacts through human capital formation on the Japanese economy and whether it has long-run effect, we simulate two policy change scenarios and compare the results of those with endogenous growth to those with exogenous growth. The results are very encouraging: (i) policy changes promote human capital accumulation and thus accelerate economic growth. (ii) they have positive effects in the long run. Moreover, the traditional exogenous growth OLG model underestimates the effect of policy reform.