The Effects of a Baby Boom on Stock Prices and Capital Accumulation in the Presence of Social Security

Andrew Abel

No 9210, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Is the stock market boom a result of the baby boom? This paper develops an overlapping generations model in which a baby boom is modeled as a high realization of a random birth rate, and the price of capital is determined endogenously by a convex cost of adjustment. A baby boom increases national saving and investment and thus causes an increase in the price of capital. The price of capital is mean-reverting so the initial increase in the price of capital is followed by a decrease. Social Security can potentially affect national saving and investment, though in the long run, it does not affect the price of capital.

JEL-codes: E22 (search for similar items in EconPapers)
Date: 2002-09
New Economics Papers: this item is included in nep-dge
Note: AG AP EFG PE
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Citations: View citations in EconPapers (5)

Published as Abel, Andrew B. "The Effects Of A Baby Boom On Stock Prices And Capital Accumulation In The Presence Of Social Security," Econometrica, 2003, v71(2,Mar), 551-578.

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Journal Article: The Effects of a Baby Boom on Stock Prices and Capital Accumulation in the Presence of Social Security (2003)
Working Paper: The effects of a baby boom on stock prices and capital accumulation in the presence of Social Security (2002)
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