Aging, Human Capital, and Productivity in France: A Generational Accounting Perspective

Xavier Chojnicki and Paul Eliot Rabesandratana

Review of Income and Wealth, 2018, vol. 64, issue 4, 872-899

Abstract: The aim of this paper is to highlight the potential productivity gains resulting from improvements in the (i) educational attainment and (ii) health status of the working‐age population. For that purpose, we develop a Generational Accounting Model applied to the French economy. Using the conventional methodology of generational accounting, we first estimate the adjustments that will be necessary to ensure the sustainability of French fiscal policy in the long term under the assumption that individual taxes and transfers grow at the same rate as labor productivity. However, this assumption does not account for the explicit determinants of individual productivity. Therefore, we then explain how productivity growth is partly due to the French population's skill level and its health level, which is approximated by the survival rate of adults. We estimate that the increased educational attainment and improved adult survival rate in France generate potentially important productivity gains that could significantly challenge the weight of the burden induced by aging. Therefore, we estimate that this change could reduce the tax burden bequeathed to future generations by 79 percent. Our results are robust to the main assumptions.

Date: 2018
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https://doi.org/10.1111/roiw.12306

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Working Paper: Aging, Human Capital, and Productivity in France: A Generational Accounting Perspective (2017)
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