Population aging and endogenous economic growth

Klaus Prettner
Austrian Academy of Sciences - Vienna Institute of Demography, Austria

This article investigates the consequences of population aging for long-run economic growth perspectives. We introduce age specific heterogeneity of households into a model of endogenous technological change. We show that the model incorporates two standard specifications of horizontal innovation as special cases: endogenous growth models with scale effects and semi-endogenous growth models without scale effects. The introduction of an age structured population implies that aggregate laws of motion for capital and consumption have to be obtained by integrating over different cohorts. It is analytically shown that these laws of motion depend on the underlying demographic assumptions. In particular, we find that increases in longevity have positive effects on per capita output growth. This holds in the steady state of endogenous as well as semi-endogenous growth models. In the latter case, the positive dependence can also be shown for the equilibrium growth rate during transition to the steady state.

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