Education, Demographics, and the Economy

MPRA Paper from University Library of Munich, Germany

Abstract: This paper deals with two issues concerning the effects of population aging on education decisions in the presence of a PAYG pension system: We first analyze the effects of an aging population per se on individual skill choices and continuous education and the production structure. Second, we study the implications of postponed retirement, which is often proposed as a measure to cope with the economic challenges of increased longevity. Our study uses a dynamic general equilibrium framework with overlapping generations and probabilistic aging. Themodel allows for capital-skill complementarity in the production of final output. As a response to population aging, in a small open economy with a fixed interest rate, our first simulation shows that GDP is depressed due to an adverse effect on skill choice and labor supply. We then introduce postponed retirement as a potentially dampening policy measure due to its encouragement of human capital formation. However, since there is less private saving in this scenario, the overall effect on GDP is even worse than in the pure aging scenario.

Keywords: Education; Human Capital; Ageing; Demographics (search for similar items in EconPapers)
JEL-codes: J10 J24 (search for similar items in EconPapers)
Date: 2006-02-01
New Economics Papers: this item is included in nep-cmp, nep-edu and nep-hrm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Journal Article: Education, demographics, and the economy (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:337

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