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Social Security Tax and Endogenous Technical Change in an Economy with an Aging Population

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  • Codrina Rada

Abstract

This paper presents a classical model of economic growth which incorporates class conflict and induced technological change to show how demographic changes can affect future income distribution and production relations in industrialized countries. Specifically, I use an extended real wage Phillips curve to account for the effects of a social security tax on income distribution and therefore on capital accumulation and employment. In this framework output growth is determined from the supply side by available savings. Analytical and simulation results indicate that the sustainability of an economy with fast population aging over transient paths hinges upon improvements in labor productivity, hence, the specific mechanism of technical progress in place.

Suggested Citation

  • Codrina Rada, 2011. "Social Security Tax and Endogenous Technical Change in an Economy with an Aging Population," Working Paper Series, Department of Economics, University of Utah 2011_04, University of Utah, Department of Economics.
    • Handle: RePEc:uta:papers:2011_04
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    File URL: http://economics.utah.edu/research/publications/2011_04.pdf
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    References listed on IDEAS

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    1. Gilles Saint-Paul, 1992. "Fiscal Policy in an Endogenous Growth Model," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(4), pages 1243-1259.
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    Cited by:

    1. Rada, Codrina & Tavani, Daniele & von Arnim, Rudiger & Zamparelli, Luca, 2023. "Classical and Keynesian models of inequality and stagnation," Journal of Economic Behavior & Organization, Elsevier, vol. 211(C), pages 442-461.
    2. Daniele Tavani & Luca Zamparelli, 2017. "Endogenous Technical Change In Alternative Theories Of Growth And Distribution," Journal of Economic Surveys, Wiley Blackwell, vol. 31(5), pages 1272-1303, December.
    3. Srdelic, Leonarda & Davila-Fernandez, Marwil J., 2022. "Demographic transition and economic growth in 6-EU member states," MPRA Paper 112188, University Library of Munich, Germany.
    4. Kojun Hamada & Akihiko Kaneko & Mitsuyoshi Yanagihara, 2022. "Fertility decline and a pay‐as‐you‐go pension system in a two‐sector model," Metroeconomica, Wiley Blackwell, vol. 73(2), pages 466-480, May.
    5. Stamegna, Marco, 2022. "Induced innovation, the distributive cycle, and the changing pattern of labour productivity cyclicality: a SVAR analysis for the US economy," MPRA Paper 113855, University Library of Munich, Germany.
    6. Tavani, Daniele & Zamparelli, Luca, 2021. "Labor-augmenting technical change and the wage share: New microeconomic foundations," Structural Change and Economic Dynamics, Elsevier, vol. 56(C), pages 27-34.
    7. Stamegna, Marco, 2022. "Wage inequality and induced innovation in a classical-Marxian growth model," MPRA Paper 113805, University Library of Munich, Germany.
    8. Luciano Fanti, 2014. "Raising the Mandatory Retirement Age and its Effect on Long-run Income and Pay-as-you-go (PAYG) Pensions," Metroeconomica, Wiley Blackwell, vol. 65(4), pages 619-645, November.

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    More about this item

    Keywords

    Population aging; Social security tax; Endogenous technical change;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

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