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Aging and Automation in Economies with Search Frictions

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  • Zhang, Xiaomeng
  • Palivos, Theodore
  • Liu, Xiangbo

Abstract

This paper investigates the impact of an increase in life expectancy on the level and the distribution of income in the presence of skill heterogeneity and automation capital. It shows analytically that an increase in life expectancy induces the replacement of low-skilled workers by automation capital and high-skilled workers. It also raises the skill premium, but has an ambiguous effect on total income. When we perform a simulation exercise, based on US data, we find that an increase in life expectancy raises the level of income but exacerbates its distribution. For this reason, we also examine redistributive policies that can mitigate some of the negative effects that follow an increase in life expectancy.

Suggested Citation

  • Zhang, Xiaomeng & Palivos, Theodore & Liu, Xiangbo, 2021. "Aging and Automation in Economies with Search Frictions," MPRA Paper 107950, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:107950
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    References listed on IDEAS

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    Cited by:

    1. Xiaomeng Zhang & Theodore Palivos & Xiangbo Liu, 2022. "Aging and automation in economies with search frictions," Journal of Population Economics, Springer;European Society for Population Economics, vol. 35(2), pages 621-642, April.
    2. Arthur Jacobs & Freddy Heylen, 2021. "Demographic change, secular stagnation and inequality: automation as a blessing?," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 21/1030, Ghent University, Faculty of Economics and Business Administration.
    3. Catarina Peralta & Pedro Mazeda Gil, 2021. "Automation, Education, and Population: Dynamic Effects in an OLG Growth and Fertility Model," CEF.UP Working Papers 2102, Universidade do Porto, Faculdade de Economia do Porto.

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    More about this item

    Keywords

    Life Expectancy; Automation; Search and Matching; Skill Heterogeneity;
    All these keywords.

    JEL classification:

    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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