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Population aging and endogenous economic growth

  • Klaus Prettner

    ()

    (Harvard Center for Population and Development Studies)

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.

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File URL: http://www.hsph.harvard.edu/pgda/WorkingPapers/2011/PGDA_WP_72.pdf
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Paper provided by Program on the Global Demography of Aging in its series PGDA Working Papers with number 7211.

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Date of creation: Jul 2011
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Handle: RePEc:gdm:wpaper:7211
Contact details of provider: Web page: http://www.hsph.harvard.edu/pgda

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