Demographic Change, Human Capital and Endogenous Growth

52 Pages Posted: 6 Aug 2009

See all articles by Alexander Ludwig

Alexander Ludwig

Goethe University Frankfurt

Thomas Schelkle

London School of Economics & Political Science (LSE)

Edgar Vogel

Deutsche Bundesbank; Max Planck Society for the Advancement of the Sciences - Munich Center for the Economics of Aging (MEA)

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Date Written: August 10, 2007

Abstract

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.

Keywords: population aging, human capital, endogenous growth, heterogenous agents, distribution of welfare

JEL Classification: E17, E25, D33, C68, J11, J24

Suggested Citation

Ludwig, Alexander and Schelkle, Thomas and Vogel, Edgar, Demographic Change, Human Capital and Endogenous Growth (August 10, 2007). MEA Discussion Paper No. 151-07, Available at SSRN: https://ssrn.com/abstract=1444906 or http://dx.doi.org/10.2139/ssrn.1444906

Alexander Ludwig (Contact Author)

Goethe University Frankfurt ( email )

Grüneburgplatz 1
Frankfurt am Main, 60323
Germany

Thomas Schelkle

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

Edgar Vogel

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Strasse 14
Frankfurt am Main, 60431
Germany

HOME PAGE: http://www.bundesbank.de

Max Planck Society for the Advancement of the Sciences - Munich Center for the Economics of Aging (MEA) ( email )

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Munich, 80799
Germany

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