Human capital formation and macroeconomic performance in an ageing small open economy
AbstractWe study the effects of stylized demographic and fiscal shocks on the macroeconomic performance of an industrialized small open economy. We construct an overlapping-generations model which incorporates a realistic description of the mortality process. Agents engage in educational activities at the start of life and thus create human capital to be used later on in life for production purposes. Simple and intuitive expressions are derived which demonstrate the key economic and demographic mechanisms that are operating in the model. The engine of growth during the demographic transition is an intergenerational externality in the production of human capital. In a calibrated version of our model, we find that the effects of increased longevity on human capital formation are small whereas the reduction in fertility has a rather strong effect.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economic Dynamics and Control.
Volume (Year): 33 (2009)
Issue (Month): 3 (March)
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Web page: http://www.elsevier.com/locate/jedc
Demography Education Human capital Economic growth Fertility rate Ageing Overlapping generations Small open economy;
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