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Population aging and endogenous economic growth

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  • Klaus Prettner

    (Harvard Center for Population and Development Studies)

Abstract

This article investigates the consequences of population aging for long-run economic growth perspectives. We introduce age specific heterogeneity of households into a model of research and development (R&D) based technological change. We show that the framework incorporates two standard specifications as special cases: endogenous growth models with scale e ects and semi-endogenous growth models without scale effects. The introduction of an age structured population implies that aggregate laws of motion for capital and consumption have to be obtained by integrating over different cohorts. It is analytically shown that these laws of motion depend on the underlying demographic assumptions. Our results are that (i) increases in longevity have positive effects on per capita output growth, (ii) decreases in fertility have negative effects on per capita output growth, (iii) the longevity effect dominates the fertility e ect in case of endogenous growth models and (iv) population aging fosters long-run growth in endogenous growth models, while the converse holds true in semiendogenous growth frameworks.

Suggested Citation

  • Klaus Prettner, 2011. "Population aging and endogenous economic growth," PGDA Working Papers 7211, Program on the Global Demography of Aging.
  • Handle: RePEc:gdm:wpaper:7211
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    population aging; endogenous technological change; longrun economic growth;
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