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Population Aging, Economic Growth, and the Importance of Capital

Author

Listed:
  • Chadwick C Curtis

    (University of Richmond)

  • Steven Lugauer

    (University of Kentucky)

Abstract

This paper argues that the impact on economic growth from the on-going demographic transition in the population age-distribution depends critically on the relative importance of labor versus capital in production. Our key insight is that as the working fraction of the population decreases, output per person does not necessarily fall. Within an Overlapping Generations model with a Cobb-Douglas aggregate production function, population aging can increase output per person, if production is sufficiently capital intensive. Crosscountry regressions provide empirical support for our theory.

Suggested Citation

  • Chadwick C Curtis & Steven Lugauer, 2022. "Population Aging, Economic Growth, and the Importance of Capital," Journal of Economic Insight, Missouri Valley Economic Association, vol. 48(1), pages 19-31.
    • Handle: RePEc:mve:journl:v:48:y:2022:i:1:p:19-31
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    More about this item

    JEL classification:

    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • J1 - Labor and Demographic Economics - - Demographic Economics
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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