One strategy for responding to population aging emphasizes capital accumulation. Many of the fundamental insights were established by Modigliani and Brumberg (1954) and Tobin (1967) who explored the implications of the economic lifecycle for saving and investment. The lifecycle has implications for both because the old-age deficit is funded in part by asset-based reallocations. Population aging will lead to an increase in the demand for assets for three reasons. First, to the extent that longer life expectancy leads to longer retirement, the incentive to accumulate more during the working years will increase. Second, because fertility is lower, fewer resources may be devoted to child rearing and more to saving for retirement. The third reason is simply due to age composition. Older individuals are wealthier because they have had longer to accumulate wealth; hence, a population
composed of more old people will have greater wealth per capita.