The Effects of a Baby Boom on Stock Prices and Capital Accumulation in the Presence of Social Security
Is the stock market boom a result of the baby boom? This paper develops an overlapping generations model in which a baby boom is modeled as a high realization of a random birth rate, and the price of capital is determined endogenously by a convex cost of adjustment. A baby boom increases national saving and investment and thus causes an increase in the price of capital. The price of capital is mean-reverting so the initial increase in the price of capital is followed by a decrease. Social Security can potentially affect national saving and investment, though in the long run, it does not affect the price of capital.
|Date of creation:||Sep 2002|
|Date of revision:|
|Publication status:||published as Abel, Andrew B. "The Effects Of A Baby Boom On Stock Prices And Capital Accumulation In The Presence Of Social Security," Econometrica, 2003, v71(2,Mar), 551-578.|
|Note:||AG AP EFG PE|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
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