Chapter 2. Macroeconomics Aging and Growth Inevitable population aging and slower population growth will affect the economies of all nations in ways influenced by cultural values institutional arrangements and economic incentives. One outcome will be a tendency toward increased capital intensity higher wages and lower returns on capital a tendency partially offset when the elderly are supported by public or private transfers rather than assets and when economies are open in which case aging will lead to increased flows of capital and labor. Rising human capital investment per child accompanies the falling fertility that drives population aging and partially offsets slower labor force growth. Research to date finds little effect on technological progress or labor productivity. National differences in labor supply at older ages per capita consumption of the elderly relative to younger ages strength of public pension and health care systems and health and vitality of the elderly all condition the impact of population aging on the economy. Policy responses include increasing the size of the labor force mainly by raising the retirement age; reducing benefits and or raising taxes for public transfer programs for the elderly with concern for deadweight loss and the fair distribution of costs across socioeconomic classes; investing more in children to increase the quality and productivity of the future labor force; and public programs that promote fertility by facilitating market work for women with children.