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Introducing Demographic Changes in a Model of Economic Growth and Income Distribution


  • Codrina Rada


Unprecedented demographic changes are set to unfold in most of the industrialized world. They are relevant not only because of the diminishing pool of workers, but also because of the increasing importance of retirees as an economic class. Retirees’ consumption and saving patterns can differ considerably from those of wage earners and capitalists, as retirees tend to consume more services and save less or in fact dissave. From this perspective of changing aggregate consumption and saving patterns I argue that population aging together with existing constraints to growth and the institutional framework in place leads to a reconfiguration of income distribution and therefore to possible changes in the growth rate of the economy. Understanding how future income distribution may look like and the behavior of different economic classes, helps in designing the right policies to accommodate the demographic transition.

Suggested Citation

  • Codrina Rada, 2009. "Introducing Demographic Changes in a Model of Economic Growth and Income Distribution," Working Paper Series, Department of Economics, University of Utah 2009_01, University of Utah, Department of Economics.
  • Handle: RePEc:uta:papers:2009_01

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    References listed on IDEAS

    1. Bhaduri, Amit & Marglin, Stephen, 1990. "Unemployment and the Real Wage: The Economic Basis for Contesting Political Ideologies," Cambridge Journal of Economics, Oxford University Press, vol. 14(4), pages 375-393, December.
    2. James Poterba & Joshua Rauh & Steven Venti & David Wise, 2007. "Defined Contribution Plans, Defined Benefit Plans, and the Accumulation of Retirement Wealth," NBER Chapters,in: Public Policy and Retirement, Trans-Atlantic Public Economics Seminar (TAPES), pages 2062-2086 National Bureau of Economic Research, Inc.
    3. Thomas I. Palley, 1998. "The Economics of Social Security: An Old Keynesian Perspective," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 21(1), pages 93-110, September.
    4. Greenspan & Alan, 2003. "Aging global population: testimony before the Special Committee on Aging, U.S. Senate, February 27, 2003," Speech 21, Board of Governors of the Federal Reserve System (U.S.).
    5. Thomas Palley, 2007. "Macroeconomics and monetary policy: competing theoretical frameworks," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 30(1), pages 61-78.
    6. Eckhard Hein & Lena Vogel, 2008. "Distribution and growth reconsidered: empirical results for six OECD countries," Cambridge Journal of Economics, Oxford University Press, vol. 32(3), pages 479-511, May.
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    8. C. W. M. Naastepad, 2006. "Technology, demand and distribution: a cumulative growth model with an application to the Dutch productivity growth slowdown," Cambridge Journal of Economics, Oxford University Press, vol. 30(3), pages 403-434, May.
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    10. Thomas R. Michl & Duncan K. Foley, 2004. "Social security in a Classical growth model," Cambridge Journal of Economics, Oxford University Press, vol. 28(1), pages 1-20, January.
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    More about this item


    population aging; income distribution and growth; Keynesian macroeconomics;

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General

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