Italy’s population is ageing fast and the old age dependency ratio is projected to rise substantially over the next decades. This could contribute negatively to the growth of output per capita for two reasons. The first is that, at given agespecific employment rates, a simple accounting effect will tend to decrease the aggregate rate of employment. The paper argues that this effect could be offset, at least partially, if Italy’s low rates of employment for some population groups (women and elderly) now underrepresented in the workforce were increased to levels similar to those currently observed in some European countries. The second derives from the behavioural consequences of ageing on output per worker, reflecting the idea that older workers tend to be less productive than young ones. By using a pure labour model under different technological conditions, the paper shows that the ageing of the workforce need not have negative effects on productivity over the next few decades. While the negative effects on productivity of labour force ageing are not inevitable, the increase in the old age dependency ratio will have distributive consequences. Given the constraints on the GDP share of pension expenditure, current official projections imply a significant reduction of the ratio of average pension to average productivity from 2015 onwards.
