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Demographic Change, Human Capital and Endogenous Growth

  • Alexander Ludwig

    ()

  • Thomas Schelkle

    ()

  • Edgar Vogel

    ()

    (Munich Center for the Economics of Aging (MEA))

This paper employs a large scale overlapping generations (OLG) model with endogenous education to evaluate the quantitative role of human capital adjustments for the economic consequences of demographic change. We find that endogenous human capital formation is an important adjustment mechanism which substantially mitigates the macroeconomic impact of demographic change. Welfare gains from demographic change for newborn households are approximately three times higher when households endogenously adjust their education. Low ability agents experience higher welfare gains. Endogenous growth through human capital formation is found to increase the long-run growth rate in the economy by 0.2-0.4 percentage points.

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Paper provided by Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy in its series MEA discussion paper series with number 07151.

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Date of creation: 19 Oct 2007
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Handle: RePEc:mea:meawpa:07151
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