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CAPITAL‐ AND LABOR‐SAVING TECHNICAL CHANGE IN AN AGING ECONOMY
Author(s) -
Irmen Andreas
Publication year - 2017
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/iere.12216
Subject(s) - economics , dependency ratio , life expectancy , technical change , population ageing , per capita , capital (architecture) , affect (linguistics) , labour economics , population , physical capital , capital deepening , population growth , technical progress , fertility , total fertility rate , human capital , macroeconomics , capital formation , productivity , market economy , financial capital , research methodology , history , linguistics , philosophy , demography , archaeology , sociology , family planning
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.