Capital‐ and Labor‐Saving Technical Change in an Aging Economy

25 Pages Posted: 6 Feb 2017

See all articles by Andreas Irmen

Andreas Irmen

University of Luxembourg - Ceter for Research in Economic Analysis (CREA); CESifo (Center for Economic Studies and Ifo Institute for Economic Research), Munich

Date Written: February 2017

Abstract

Does population aging and the associated increase in the old‐age dependency ratio affect economic growth? The answer is given in a novel analytical framework that allows for population aging to affect endogenous capital‐ and labor‐saving technical change. In a steady state capital‐saving technical progress vanishes, and the economy's growth rate of per‐capita variables reflects only labor‐saving technical change. The mere possibility of capital‐saving technical change is shown to imply that the economy's steady‐state growth rate becomes independent of its age structure: Neither a higher life expectancy nor a decline in fertility affects economic growth in the long run.

Suggested Citation

Irmen, Andreas, Capital‐ and Labor‐Saving Technical Change in an Aging Economy (February 2017). International Economic Review, Vol. 58, Issue 1, pp. 261-285, 2017. Available at SSRN: https://ssrn.com/abstract=2911334 or http://dx.doi.org/10.1111/iere.12216

Andreas Irmen (Contact Author)

University of Luxembourg - Ceter for Research in Economic Analysis (CREA) ( email )

162a, avenue de la Faïencerie
Luxembourg, L – 1511
Luxembourg

HOME PAGE: http://wwwen.uni.lu/recherche/fdef/crea/people/andreas_irmen

CESifo (Center for Economic Studies and Ifo Institute for Economic Research), Munich

Poschinger Str. 5
Munich, DE-81679
Germany

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