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Demographic Change, Human Capital and Endogenous Growth

Alexander Ludwig (), Thomas Schelkle () and Edgar Vogel

No 7151, MEA discussion paper series from Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy

Abstract: This paper employs a large scale overlapping generations (OLG) model with endogenous education to evaluate the quantitative role of human capital adjustments for the economic consequences of demographic change. We find that endogenous human capital formation is an important adjustment mechanism which substantially mitigates the macroeconomic impact of demographic change. Welfare gains from demographic change for newborn households are approximately three times higher when households endogenously adjust their education. Low ability agents experience higher welfare gains. Endogenous growth through human capital formation is found to increase the long-run growth rate in the economy by 0.2-0.4 percentage points.

Date: 2007-10-19
New Economics Papers: this item is included in nep-dge, nep-edu and nep-hrm
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Working Paper: Demographic change, human capital and endogenous growth (2007) Downloads
Working Paper: Demographic Change, Human Capital and Endogenous Growth (2007)
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