The world’s interconnected demographic/fiscal transition

Hans Fehr, Sabine Jokisch and Laurence Kotlikoff

The Journal of the Economics of Ageing, 2013, vol. 1-2, 35-49

Abstract: Will incomes of low and high skilled workers continue to diverge? Yes, according to our paper’s dynamic, six-good, five-region – U.S., Europe, N.E. Asia (Japan, Korea, Taiwan, Hong Kong), China, and India, general equilibrium, life-cycle model. The model, which endogenizes specialization and features incomplete factor-price equalization, predicts a near doubling of the ratio of high- to low-skilled wages over the century. Increasing wage inequality arises from a traditional source – a rising worldwide relative supply of unskilled labor, reflecting Chinese and Indian productivity catchup. But growing wage inequality can be greatly mitigated if China and India dramatically improve the skill mix of successive cohorts via improved education.

Keywords: Demographic transition; Overlapping generations (OLG); Computable general equilibrium models (CGE); Wage inequality; Asian catchup; Specialization (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:joecag:v:1-2:y:2013:i::p:35-49

DOI: 10.1016/j.jeoa.2013.07.002

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