CAPITAL‐ AND LABOR‐SAVING TECHNICAL CHANGE IN AN AGING ECONOMY

Andreas Irmen

International Economic Review, 2017, vol. 58, issue 1, 261-285

Abstract: Does population aging and the associated increase in the old‐age dependency ratio affect economic growth? The answer is given in a novel analytical framework that allows for population aging to affect endogenous capital‐ and labor‐saving technical change. In a steady state capital‐saving technical progress vanishes, and the economy's growth rate of per‐capita variables reflects only labor‐saving technical change. The mere possibility of capital‐saving technical change is shown to imply that the economy's steady‐state growth rate becomes independent of its age structure: Neither a higher life expectancy nor a decline in fertility affects economic growth in the long run.

Date: 2017
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https://doi.org/10.1111/iere.12216

Related works:
Working Paper: Capital- and Labor-Saving Technical Change in an Aging Economy (2013)
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