The Role of Endogenous Skill Choice in an Aging Society
Type
discussion paper
Date Issued
2005-05-25
Author(s)
Abstract
This paper analyzes the effects of an aging population on individual skill choices and the production structure by means of a dynamic general equilibrium model with overlapping generations and probabilistic aging. The model allows for capital-skill complementarity, which strongly affects the outcomes in a small open economy setting vs. a closed (or equivalently worldwide) economy. In an open economy with a fixed real interest rate, the necessary increase in the contribution rate discourages labor supply and depresses GDP. With a variable real interest rate, however, capital usage increases and - by the capital-skill complementarity - also employment of high skilled labor. The mobilization of highly productive labor gives a boost to GDP. Hence, the often cited adverse effects of aging are mitigated and can be overcome when taking into account a more realistic production structure.
Funding(s)
Language
English
Keywords
Skills
Human Capital
Aging
Demographics
Education
Capital-Skill Complementarity
Life-Cycle
HSG Classification
contribution to scientific community
Refereed
No
Start page
25
Subject(s)
Division(s)
Eprints ID
18295