Implications of increasing college attainment for aging in general equilibrium

Juan Carlos Conesa, Timothy Kehoe, Vegard Nygaard and Gajendran Raveendranathan

European Economic Review, 2020, vol. 122, issue C

Abstract: We develop an overlapping generations general equilibrium model of the U.S. economy with heterogeneous consumers who face idiosyncratic earnings and health risk to study the implications of increasing college attainment, decreasing fertility, and increasing longevity (2005–2100). While all three trends contribute to a higher old age dependency ratio, increasing college attainment has different implications because it increases labor productivity. Decreasing fertility and increasing longevity require the government to increase the average labor tax rate from 33.5 to 47.1%. Increasing college attainment lowers the required tax increase by 12.0 percentage points. The labor tax rate required to balance the government budget is higher under general equilibrium than in a small open economy with a constant interest rate, because the reduction in the interest rate lowers capital income tax revenues.

Keywords: College attainment; Aging; Health care; Taxation; General equilibrium (search for similar items in EconPapers)
JEL-codes: H20 H51 H55 I13 J11 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Related works:
Working Paper: Implications of Increasing College Attainment for Aging in General Equilibrium (2019)
Working Paper: Implications of Increasing College Attainment for Aging in General Equilibrium (2019)
Working Paper: Implications of Increasing College Attainment for Aging in General Equilibrium (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:122:y:2020:i:c:s0014292119302247

DOI: 10.1016/j.euroecorev.2019.103363

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