Vintage human capital, demographic trends, and endogenous growth (original) (raw)

Population ageing and economic growth in seven OECD countries

Economic Modelling, 1999

It is well known that over the next several decades, there will be significant changes in the age structure of OECD populations. According to recent demographic projections by the United Nations, the share of the old-aged population is expected to double, on average, over the next 50 years in the major industrialised countries. These demographic changes may have significant fiscal and economic consequences and pose important public policy chal-Ž. lenges for the countries involved. In this paper, we extend the Hviding and Merette 1998 wMacroeconomics Effects of Pension Reforms in the Context of Ageing: OLG Simulations x for Seven OECD Countries. OECD Working Paper no. 201, Paris computable overlapping-Ž. generation OLG models for seven industrialised countries in order to examine the impact of population ageing on economic growth. The model is populated by a series of 15 rational overlapping generations that optimally choose life patterns of consumption and bequest. The modified version incorporates endogenous growth, which is generated by the accumulation of both physical and human capital. Typically, a generation invests mostly in human capital when young, and in physical capital when middle-aged. Our results show that estimates of the long-run economic effects of population ageing are significantly altered when the model features endogenous growth. The results suggest that population ageing could create more opportunities for future generations to invest in human capital formation, which would stimulate economic growth and reduce significantly the apprehended negative impact of ageing on output per capita.

Human capital and economic growth in an overlapping generations model

Journal of Economics, 1995

The paper describes an aggregative optimal growth model, the essential features of which are that individuals are mortal and obtain their labor skill through educational training. The process of human capital formation is described by an education function which relates the pass rate to the educational expenditure per student. Two alternative scenarios, private and public education regimes, are separately investigated. Under the decentralized education regime, risk-neutral individuals borrow to finance their education when young. Under the centralized education regime, the cost of education is financed by taxes imposed on the workers in the economy, and the central government maximizes a long-term social target function. The equilibria of both regimes are analyzed and various comparative static results derived. It is shown that educational investment in a decentralized equilibrium is higher than that in the centralized steady state. We also establish that there exists a time discount rate at which or above which the decentralized per capita consumption exceeds that of the centralized steady state whereas for time rates of discount sufficiently near the population growth rate, the above result will be reversed.

A model of longevity, human capital and growth

2010

Long run economic growth and its transitional dynamics are determined in a general equilibrium model of endogenous longevity, human capital and growth. Agents in overlapping generations survive safely for the first two periods of life and face an endogenous probability of surviving for a third period. Given this probability, each agent maximizes her expected lifetime utility choosing consumption, and the

Life expectancy, retirement and endogenous growth

Economic Modelling, 2004

In this paper I address the links between life expectancy, retirement age and economic growth. I build a finite horizon OLG model with exogenous retirement in which human capital accumulation drives endogenous growth. The return on individual investment in human capital depends positively on the remaining active years. Postponing retirement age raises the return and investment in human capital, and the proportion of working individuals, thus increasing the sustainable growth rate. Increments in life expectancy do not increase the growth rate by themselves, but reduce it: optimal investment in human capital is not affected and the proportion of retirees becomes larger. Therefore, increases in life expectancy lead to higher growth rates only if they are accompanied by simultaneous increments in the working period.

Human Capital Demographic Transition and Economic Growth

2003

This paper extends the literature on economic growth and demographic change by developing a neo-classical model of endogenous growth in which both economic and demographic outcomes are jointly determined. The key point in this model is the endogenisation of child mortality rate by linking it to parents' human capital, defined in a broad sense to include both education and health. The numerical simulation of this model confirms that as economic development takes place there will be a decline in child mortality rate followed by similar trend in fertility rate, hence, population growth rate.

LONG-TERM CORRELATIONS BETWEEN DEMOGRAPHIC VARIABLES AND ECONOMIC GROWTH

2009

Starting from existing literature and some our recent studies, we developed several modelling schemes that could be useful to improve the strategies oriented to achieve a demographic and economic balance between generations. In this way, we can obtain simulations from a country or group of countries (European Union, for example) on long term and quantify the impact of demographic aging on macroeconomic aggregates, taking into account that usually standard macroeconomic models are general equilibrium models only on short and medium term and the population is considered as an exogenous variable.

Growth and Longevity from the Industrial Revolution to the Future of an Aging Society

2006

Abstract: Aging of the population will affect the growth path of all countries. To assess the historical and future importance of this claim we use two popular approaches and evaluate their merits and disadvantages by confronting them to Swedish data. We first simulate an endogenous growth model with human capital linking demographic changes and income growth. Rising longevity increases the incentive to get education, which in turn has ever-lasting effects on growth through a human capital externality.

Demography and Growth: A Unified Treatment of Overlapping Generations

Macroeconomic Dynamics, 2012

We construct a unified overlapping-generations framework of equilibrium growth that includes the Blanchard “perpetual youth” model, the Samuelson model, and the infinitely lived–agent model as limit specifications for a “realistic” two-parameter survivorship function. We assess how the limit specifications compare with the general survival function, and analyze how exogenous changes in demographic conditions affect equilibrium growth and savings rates. Predicted effects are consistent with some cross-country correlations between demographic conditions and growth rates.

Age Structure, Education and Economic Growth

2012

The effect of changes in age structure on economic growth has been widely studied in the demography and population economics literature. The beneficial effect of changes in age structure after a decrease in fertility has become known as the demographic dividend. In this paper we first present the motivation for also explicitly addressing changes in education in addition to and age structure and then reassess the empirical evidence on the associations among economic growth, changes in age structure, labor force participation and new data on educational attainment. Using a global panel of countries, we find that once the effect of human capital dynamics is controlled for there is no evidence that changes in age structure affect labor productivity. Our results imply that improvements in educational attainment are not only drivers of fertility decline and hence age structural changes but are also key to explaining productivity and income growth.