Aging Population and Technology Adoption

Daniele Angelini ()

No 2023-01, Working Paper Series of the Department of Economics, University of Konstanz from Department of Economics, University of Konstanz

Abstract: Population aging affects the relative supply of inputs in the economy altering the in-centives to adopt different types of technology. Empirically, I document a hump-shaped relation between the age of the population and the adoption of new-technology proxied by the ICT capital share. To explain the non-monotonic relationship and identify the mech-anisms at play, I build a dynamic general equilibrium model with endogenous technology and R&D-driven technological progress. New-technology is defined as a labor-saving (capital-intensive) technology requiring skills to be used. An increase in the capital-to-labor ratio driven by population aging increases new-technology adoption while the increasing scarcity of young workers that have higher incentives to acquire the comple-mentary skills to new-technology reduces it. The model, calibrated to fit European data, shows that the demographic structure of the population is a major determinant of tech-nology adoption. Population aging explains almost half of the increase in new-technology adoption in the period 1995-2020 and it determines its reduction in the period 2020-2045. A decomposition exercise shows that population aging is a primary source of the increase in the skill premium explaining a larger share of its increase than technological progress.

Keywords: Automation; Demographic change; Human capital; Inequality; R&D; OLG (search for similar items in EconPapers)
JEL-codes: E25 H23 J11 J24 J26 J31 O31 O33 (search for similar items in EconPapers)
Date: 2023-02-01
New Economics Papers: this item is included in nep-age, nep-dge, nep-gro, nep-ict, nep-ino, nep-lma and nep-tid
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