Population Aging and the Direction of Technical Change
AbstractAn analytical framework is developed to study the repercussions between endogenous capital- and labor-saving technical change and population aging. Following an intuition often attributed to Hicks (1932), I ask whether and how population aging aff ects the relative scarcity of factors of production, relative factor prices, and the direction of induced technical change. Aging is equivalent to an increase in the old-age dependency ratio of an OLG-economy with two-period lived individuals. In this framework aging increases the relative scarcity of labor with respect to capital. Therefore, there will be more labor- and less capital-saving technical change. Unless there are contemporaneous knowledge spillovers across innovating firms technical change induced by a small increase in the old-age dependency ratio has no first-order effect on current GDP. The presence of capital-saving technical change is shown to imply that the economy's steady-state growth rate is independent of its age structure.
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Date of creation: 11 Dec 2009
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Demographic Transition; Capital Accumulation; Direction of Technical Change;
Other versions of this item:
- Andreas Irmen, 2009. "Population Aging and the Direction of Technical Change," CESifo Working Paper Series 2888, CESifo Group Munich.
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
- O33 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
- D92 - Microeconomics - - Intertemporal Choice - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
- D91 - Microeconomics - - Intertemporal Choice - - - Intertemporal Household Choice; Life Cycle Models and Saving
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