The Role of Endogenous Skill Choice in an Aging Economy

Christian Jaag

Public Economics from EconWPA

Abstract: This chapter analyzes the effects of an aging population on individual skill choices and the production structure by means of a dynamic general equilibrium model with overlapping generations and probabilistic aging. The model allows for capital-skill complementarity, which strongly affects the outcomes in a small open economy setting vs. a closed (or equivalently worldwide) economy. In an open economy with a fixed real interest rate, the necessary increase in the contribution rate discourages labor supply and depresses GDP. With a variable real interest rate, however, capital usage increases and - by the capital- skill complementarity - also employment of high skilled labor. The mobilization of highly productive labor gives a boost to GDP. Hence, the often cited adverse effects of aging are mitigated and can be overcome when taking into account a more realistic production structure.

Keywords: Aging; Human Capital; Demographics; Education; Capital-Skill Complementarity; Life-Cycle (search for similar items in EconPapers)
JEL-codes: D58 D91 H55 J24 (search for similar items in EconPapers)
Date: 2005-05-17
Note: Type of Document - pdf; pages: 25
View list of references

Downloads: (external link)
http://129.3.20.41/eps/pe/papers/0505/0505005.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwppe:0505005

Access Statistics for this paper

More papers in Public Economics from EconWPA
Series data maintained by EconWPA ().