One aspect of the demographic impact that does not suggest a ready answer is the behaviour of the corporate sector. There are two polar arguments. The popular argument is that the corporate sector will respond to demographic headwinds by slowing down the rate at which it accumulates capital so much that the capital/labour ratio falls. Our view is that the corporate sector is likely to respond by raising the capital/labour ratio, i.e. by adding capital to compensate for labour, which is the factor of production that will be getting scarcer and more expensive.
