Population aging in middle-income economies produces macroeconomic and distributional consequences that aggregate frameworks cannot detect. This paper develops a multi-household CGE model calibrated to a 26-sector Social Accounting Matrix for Thailand (2024) and traces the labor, saving, and fiscal channels of aging across eleven counterfactual scenarios. Three findings emerge. First, aging’s primary macroeconomic cost operates through capital accumulation, not output contraction: investment falls seven times faster than the GDP under a savings-driven closure, because middle-aged households—the economy’s dominant net savers—compress lifecycle saving in response to aging. The saving channel alone amplifies the labor supply shock four-fold (range: 3.5–4.5). Second, aging can raise elderly welfare. When elderly households retain labor market attachment, wage gains from tighter factor markets outweigh declining capital returns—a welfare reversal invisible to representative agent and OLG frameworks by construction. The critical labor income threshold is αL∗=35.5% (range: 34.8–36.2%), confirmed across all participation increments tested (elderly welfare gain: THB 341–521 million). Third, no single instrument satisfies efficiency and equity simultaneously. Pension transfers crowd out investment nonlinearly above 12 percent of tax revenue (range: 10–14%); health demand expansion is the decisive complement that converts redistribution into a near-Pareto improvement. Policy complementarity is an empirical necessity, not a theoretical refinement. Collectively, these results reframe demographic aging as a factor price redistribution mechanism whose welfare incidence is determined by the cohort-level income composition—with direct implications for aging policy in middle-income economies facing rapid demographic transitions under tighter fiscal constraints than for advanced economies encountered at equivalent demographic stages.
Montchai Pinitjitsamut (Fri,) studied this question.