Abstract
This study analyzed the influence of planning and economic assessment which ignore the transition of the future population composition in a depopulation and aging society. With a dynamic economic model, we compared two states of the society and the economy; one state is realized by planning which ignores the transition of the population composition, and the other state is realized by the socially optimal planning, which considers the transition of the population composition. By comparing those two states, we analyzed the consequences for the economic activity and welfare in the present and future generations which are produced by planning which ignores the transition of population composition. We showed that compared to the planning which considers depopulation, the planning which ignores depopulation makes more infrastructure investment and thus reduces the welfare of the present generation and increases the welfare of the future generations. We also showed that the planning which ignores aging of population makes the same decision as the planning which considers aging of population does. However, if the government uses a fixed social discount rate while considering aging of population, they make smaller infrastructure investment than the socially optimal level.
