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Acemoglu, Daron and Pascual Restrepo (2017).
Secular Stagnation? The Effect of Aging on Economic Growth in the Age of Automation.
NBER Working Paper No. 23077.
Abstract.
Link.
Several recent theories emphasize the negative effects of an aging population on economic growth, either because of the lower labor force participation and productivity of older workers or because aging will create an excess of savings over desired investment, leading to secular stagnation. We show that there is no such negative relationship in the data. If anything, countries experiencing more rapid aging have grown more in recent decades. We suggest that this counterintuitive finding might reflect the more rapid adoption of automation technologies in countries undergoing more pronounced demographic changes, and provide evidence and theoretical underpinnings for this argument [close]
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Barham, Tania, Karen Macours and John A. Maluccio (2013).
Boys' Cognitive Skill Formation and Physical Growth: Long-Term Experimental Evidence on Critical Ages for Early Childhood Interventions.
In: Amercian Economic Review
103(3)
, 467-71
.
Abstract.
Link.
It is often assumed that early life circumstances, in particular before age two, are important for later human capital development. Using experimental variation in the timing of benefits from a conditional cash transfer program, we test the hypothesis that intervention starting in utero and continuing in the first two years is critical. At age ten, boys exposed to the program during this period had better cognitive, but not anthropometric, outcomes than those exposed in their second year of life or later. The lack of a differential effect on anthropometrics was due catch-up growth. [close]
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Bedard, Kelly and Insook Cho (2010).
Early Gender Test Score Gaps Across OECD Countries.
In: Economics of Education Review
29(3)
, 348-363
.
Abstract.
Link.
The results reported in this paper contribute to the debate about gender skill gaps in at least three ways. First, we document the large differences in early gender gaps across developed countries using a large scale, modern, representative data source. Second, we show that countries with pro-female sorting, countries that place girls in classes with higher than average scores have smaller gender test score gaps, at least in math. Third, we show that the degree of academic tracking is correlated with observed gender gaps across developed countries. [close]
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Behrman, Jere, Mark Rosenzweig and Paul Taubman (1994).
Endowments and the Allocation of Schooling in the Family and in the Marriage Market: The Twins Experiment.
In: Journal of Political Economy
102(6)
, 1131-1174
.
Abstract.
Link.
We show how comparisons between the within-twin correlations of human capital outcomes across identical and nonidentical twins can be used to identify the variability in the individual-specific component of endowments and the responsiveness of schooling to individual-specific endowments in the family and in the marriage market even when schooling is measured with error. Estimates from two twins samples indicate that 27 (42) percent of the variance in log earnings (obesity) is due to variability in individual-specific endowments, allocations of schooling reinforce specific endowments, and individual-specific earnings endowments of men and their wives' schooling are negatively associated. [close]
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Bishai, David (2004).
Does Time Preference Change with Age?.
In: Journal of Population Economics
17(4)
, 583-602
.
Abstract.
Link.
This Study looks at compensating differentials in the National Longitudinal Survey of Youth (NLSY) to derive estimates of the levels of time preference for labor force participants in each of 15 waves of data from 1979 to 1994. With these estimates the evolution of time preference over the life course is described. Future utility among labor force participants appears to be valued more highly by subjects who are older, more schooled, white, or male. Controlling for schooling level, a higher IQ is associated with a preference for more immediate rewards. If social rates of time preference are correlated with individual rates of time preference then population aging could create intergenerational asymmetries in the social rate of time preference. This phenomenon could make the optimal investments of young populations appear selfish to future generations that are older. [close]
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Bjorklund, Anders and Christian Kjellstrom (2002).
Estimating the Return To Investments in Education: How Useful Is the Standard Mincer Equation?.
In: Economics of Education Review
21(3)
, 195-210
.
Abstract.
Link.
We examine how well the schooling coefficient in standard Mincer equations, estimated on Swedish data for 1968, 1981 and 1991, approximates the marginal internal rate of return to education. We find three cases where inference from the estimated schooling coefficient is misleading. First, the decline in return to schooling from 1968 to 1981 is mainly concentrated to college education, whereas the return to high school education is stable. Second, the rate of return is sensitive to the assumption made about the length of working life, or the retirement decision. Third, both the schooling coefficient and the internal rate of return give misleading information about the value of adult education. By comparing the present value of lifetime earnings between youth and adult education, we find large differences in favor of youth education, even though the schooling coefficient and the internal rate of return are the same. [close]
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Bloom, David E., David Canning and Günther Fink (2010).
Implications of population ageing for economic growth.
In: Oxford Review of Economic Policy
26
, 583-612
.
Abstract.
Link.
The share of the population aged 60 and over is projected to increase in nearly every country in the world during the period 2005–50. Population ageing will tend to lower both labour-force participation and savings rates, thereby raising concerns about a future slowing of economic growth. Our calculations suggest that OECD countries are likely to see modest—but not catastrophic—declines in the rate of economic growth. However, behavioural responses (including greater female labour-force participation) and policy reforms (including an increase in the legal age of retirement) can mitigate the economic consequences of an older population. In most non-OECD countries, declining fertility rates will cause labour-force-to-population ratios to rise as the shrinking share of young people will more than offset the skewing of adults towards the older ages. These factors suggest that population ageing will not significantly impede the pace of economic growth in developing countries. [close]
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Bonneuil, Noel and Raouf Boucekkine (2017).
Longevity, Age-Structure and Optimal Schooling.
In: Journal of Economic Behavior & Organization
136
, 63-75
.
Abstract.
Link.
The mechanism stating that longer life implies larger investment in human capital, is premised on the view that individual decision-making governs the relationship between longevity and education. This relationship is revisited here from the perspective of optimal period school life expectancy, obtained from the utility maximization of the whole population characterized by its age structure and its age-specific fertility and mortality. Realistic life tables such as model life tables are mandatory, because the age distribution of mortality matters, notably at infant and juvenile ages. Optimal period school life expectancy varies with life expectancy and fertility. The application to French historical data from 1806 to nowadays shows that the population age structure has indeed modified the relationship between longevity and optimal schooling. [close]
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Bonsang, Eric and Thomas Dohmen (2015).
Risk Attitude and Cognitive Aging.
In: Journal of Economic Behavior & Organization
112
, 112-126
.
Abstract.
Link.
In this paper we investigate to what extent the decrease in the willingness to take risks with age can be traced to the cognitive aging process. We use data from the Survey of Health, Aging and Retirement in Europe (SHARE) that includes both a measure of financial risk preference and measures of cognitive ability for a representative sample of individuals aged 50+ in 11 European countries. The availability of a large set of variables in SHARE allows us to control for potential confounding factors that may be related to both cognitive skills and risk attitudes. Conditional on socio-demographic characteristics, about half of the age-related cross-sectional difference in willingness to take risks can be explained by a noisy measure of cognitive skills. Further analyses indicate this is a lower bound estimate due to attenuation bias resulting from measurement error in the measure of cognition. [close]
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Bonsang, Eric, Stéphane Adam and Sergio Perelman (2012).
Does retirement affect cognitive functioning?.
In: Journal of Health Economics
31(3)
, 490-501
.
Abstract.
Link.
This paper analyses the effect of retirement on cognitive functioning using a longitudinal survey among older Americans, which allows controlling for individual heterogeneity and endogeneity of the retirement decision by using the eligibility age for social security as an instrument. The results highlight a significant negative effect of retirement on cognitive functioning. Our findings suggest that reforms aimed at promoting labour force participation at an older age may not only ensure the sustainability of social security systems but may also create positive health externalities for older individuals. [close]
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Boucekkine, Raouf, David de La Croix and Omar Licandro (2002).
Vintage Human Capital, Demographic Trends, and Endogenous Growth.
In: Journal of Economic Theory
104(2)
, 340-375
.
Abstract.
Link.
We study how economic growth is affected by demographics in an OLG model with a realistic survival law. Individuals optimally chose the dates at which they leave school to work and at which they retire. Endogenous growth arises thanks to the accumulation of generation-specific human capital. Favorable shifts in the survival probabilities induce longer schooling and later retirement but have an ambiguous effect on per-capita growth, The long-term relationship between fertility and per-capita growth is hump-shaped. Increases in longevity can be responsible for a switch from a no-growth regime to a sustained growth regime and for a positive relationship between fertility and growth to vanish. Solving numerically the equilibrium, demographic changes can have important medium-term effects even if long-term changes are very small. [close]
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Bovenberg, Lans (2003).
Financing Retirement in the European Union.
In: International Tax and Public Finance
10(6)
, 713-734
.
Abstract.
Link.
This paper explores how EU countries can address various challenges (including the aging of the population) affecting their systems of old-age income support. It presents two scenarios illustrating the most important uncertainties surrounding the major developments that affect the pension systems of the EU. To diversify these risks, EU governments should act on several fronts. In addition to the formation of human capital (especially that of children), employment (especially that of older workers) should be boosted. This calls for social insurance reform with more emphasis on individual saving schemes. Pension schemes should be more explicit about how they share demographic and other risks. Countries that currently rely heavily on public pay-as-you-go (PAYG) schemes should stimulate private pensions by gradually reducing PAYG benefits collected by high-income earners, by issuing new financial instruments, and by conducting intergenerational risk sharing through the tax system. [close]
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Canduela, Jesus, Matthew Dutton, Steve Johnson, Colin Lindsay, Ronald W McQuaid and Robert Raeside (2012).
Ageing, skills and participation in work-related training in Britain: assessing the position of older workers.
In: Work, Employment & Society
26
.
Abstract.
Link.
Policy makers have introduced a number of measures to encourage older workers to stay in the labour market, with improving access to training a particular priority. Policy action appeared justified by evidence that older workers are less likely to participate in training, and more likely to have never been offered training by employers – a key finding of Taylor and Urwin’s (2001) review of Labour Force Survey (LFS) data from 1997. This article models LFS data from 2007 to assess whether age remained a predictor of inequalities in training. It finds that men over 50 remained among those least likely to have been offered training by employers. There were other significant inequalities in participation, suggesting a polarization in access to jobs that offer opportunities for training and progression. The article concludes that policies promoting ‘active ageing’ need to challenge negative employer attitudes and acknowledge fundamental inequalities in access to skills. [close]
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Canduela, Jesus, Matthew Dutton, Steve Johnson, Colin Lindsay, Ronald W McQuaid and Robert Raeside (2012).
Ageing, skills and participation in work-related training in Britain: assessing the position of older workers.
In: Work Employment & Society
26(1)
, 42-60
.
Abstract.
Link.
Policy makers have introduced a number of measures to encourage older workers to stay in the labour market, with improving access to training a particular priority. Policy action appeared justified by evidence that older workers are less likely to participate in training, and more likely to have never been offered training by employers – a key finding of Taylor and Urwin’s (2001) review of Labour Force Survey (LFS) data from 1997. This article models LFS data from 2007 to assess whether age remained a predictor of inequalities in training. It finds that men over 50 remained among those least likely to have been offered training by employers. There were other significant inequalities in participation, suggesting a polarization in access to jobs that offer opportunities for training and progression. The article concludes that policies promoting ‘active ageing’ need to challenge negative employer attitudes and acknowledge fundamental inequalities in access to skills. [close]
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Casarico, Alessandra (1998).
Pension Reform and Economic Performance under Imperfect Capital Markets.
In: Economic Journal
108(447)
, 344-362
.
Abstract.
Link.
We consider an overlapping generations model where heterogeneous agents take decisions on consumption and investment in education under the assumption of imperfect capital markets. We study how the introduction of a pay-as-you-go arid of a fully funded pension scheme affects output and lifetime opportunities, and then analyse the impact of a pension reform. The standard neutrality result for fully funded pension schemes does not hold in this framework. We establish the conditions under which a fully funded scheme is associated with a higher investment in human capital. We show that the transition path may involve poverty traps. [close]
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Casarico, Alessandra and Carlo Devillanova (2003).
Social Security and Migration With Endogenous Skill Upgrading.
In: Journal of Public Economics
87(3-4)
, 773-797
.
Abstract.
Link.
The aim of the paper is to investigate the joint redistributive effects of migration and pensions and to reassess the sustainability issue raised in the existing economic literature. The paper first develops a theoretical framework to analyse the impact of international migration on the labour market. The model allows for heterogeneity across native-born individuals and for migrants to affect both the wages and the education decision in the recipient country. It then explicitly focuses on pensions under alternative migration scenarios. The analysis shows that migration causes redistributive effects which increase across-group wage inequality. However, the endogenous educational response by residents partially offsets the redistributive impact of migration while creating additional interest groups. Migration helps the financial sustainability of the pension scheme but the interaction between migration and pensions causes complex inter- and intragenerational redistributive conflicts, which are analysed in the paper. [close]
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Cepar, Ziga and Stefan Bojnec (2008).
Population Aging and the Education Market in Slovenia and Croatia.
In: Eastern European Economics
46(3)
, 68-86
.
Abstract.
Link.
This paper investigates key demographic developments in the Slovenian and Croatian populations and their implications for education and labor markets. Changes in fertility, mortality, and migration have led to a growing proportion of elderly people. The declining proportion of the young is one of the important structural changes affecting demand for education, implying changes in demand for labor employed in education. We use multiple regression models to analyze population aging as a variable explaining changes in demand for education in Slovenia and Croatia. We also include in the regression framework other explanatory variables that determine demand for education. We find that declining fertility has a significant negative influence on the demand for all three levels of schooling-primary, secondary, and tertiary-in both countries and is especially important to demand for primary and secondary schools. This has important policy implications that should be considered to minimize the negative trends for education markets arising from an aging population. [close]
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Chuma, Hiroyuki (1987).
Pensions, Wage Profiles, and Retirement Rules - Specific Human-Capital Approach.
In: Journal of Economic Dynamics and Controls
11(1)
, 29-64
.
Abstract.
Link.
This paper clarifies how the loss of profits by quit-related work force disturbances and the endogeneity of the length of contracts play a critical role in determination of the compensation structure. Such a loss of profits is demonstrated to be a necessary and sufficient condition which induces (non-vested) pensions and mandatory retirement synchronously. Mandatory (or pensioned) retirement, however, does not always entail upward-tilted wage profiles except in the firms in which workers' quitting creates a serious work force disturbance. The optimal length of contract is determined as a function of market opportunities and firm-specific characteristics. Finally, based on our analysis, policy implications in Japan's contemporary industrial relations are derived. [close]
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Clark, Damon and Heather Royer (2013).
The Effect of Education on Adult Health and Mortality: Evidence from Britain.
In: American Economic Review
103(6)
, 2087-2120
.
Abstract.
Link.
There is a strong, positive, and well-documented correlation between education and health outcomes. In this paper, we attempt to understand to what extent this relationship is causal. Our approach exploits two changes to British compulsory schooling laws that generated sharp across-cohort differences in educational attainment. Using regression discontinuity methods, we find the reforms did not affect health although the reforms impacted educational attainment and wages. Our results suggest caution as to the likely health returns to educational interventions focused on increasing educational attainment among those at risk of dropping out of high school, a target of recent health policy efforts. [close]
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Conde-Ruiz, Ignacio and Vincenzo Galasso (2004).
The Macroeconomics of Early Retirement.
In: Journal of Public Economics
88(9-10)
, 1849-1869
.
Abstract.
Link.
Early retirement was introduced after the appearance of redundant middle-aged workers, not entitled to pensions. This distortionary policy reduces human capital accumulation and economic growth, but shifts part of the tax burden on future generations. Why was it adopted? Alternative policies, which do not introduce long-term distortions, but impose a larger cost on the current generation of workers, were blocked by a coalition of high income workers, who did not plan to retire early, but sought to reduce the current tax burden, and low income workers, who expected to retire early and to benefit from the early retirement pension. [close]
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Cuaresma, Jesús Crespo and Tapas Mishra (2011).
The Role of Age-Structured Education Data for Economic Growth Forecasts.
In: Journal of Forecasting
30(2)
, 249-267
.
Abstract.
Link.
This paper utilizes for the first time age-structured human capital data for economic growth forecasting. We concentrate on pooled cross-country data of 65 countries over six 5-year periods (1970–2000) and consider specifications chosen by model selection criteria, Bayesian model averaging methodologies based on in-sample and out-of-sample goodness of fit and on adaptive regression by mixing. The results indicate that forecast averaging and exploiting the demographic dimension of education data improve economic growth forecasts systematically. In particular, the results are very promising for improving economic growth predictions in developing countries. [close]
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Dorsett, Richard, Silvia Lui and Martin Weale (2014).
Education and its effects on income and mortality of men aged sixty-five and over in Great Britain.
In: Labour Economics
27
, 71-82
.
Abstract.
Link.
We explore the effects of income and, additionally education on the income, self-reported health and survival of men aged sixty-five and over in Great Britain . By so doing, we identify benefits of education which are omitted in the conventional analysis with its focus on labour income excluding employers' pension contributions. We find that income at age sixty-five is significantly influenced by educational attainment and has a significant effect on survival. Even after controlling for circumstances at age sixty-five or when first observed, we identify benefits discounted to age sixty-five of £115,000 for men with higher education qualifications as compared to those with minimal qualifications. [close]
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Dostie, Benoit (2011).
Wages, Productivity and Aging.
In: De Economist
159
, 139-158
.
Abstract.
Link.
Previous empirical studies on the effect of age on productivity and wages find contradicting results. Some studies find that if workers grow older there is an increasing gap between productivity and wages, i.e. wages increase with age while productivity does not or does not increase at the same pace. However, other studies find no evidence of such an age related pay-productivity gap. We perform an analysis of the relationship between age, wage and productivity using a matched worker-firm panel dataset from Dutch manufacturing covering the period 2000-2005. We find little evidence of an age related pay-productivity gap. [close]
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Echevarria, Cruz and Amaia Iza (2000).
Income Taxation and Finite Horizons in a Human Capital Model.
In: International Tax and Public Finance
7(6)
, 665-689
.
Abstract.
Link.
We address the issue of capital vs. labor income taxation in an overlapping generations model with a positive externality in the human capital production. We compare the performance of the economy in the steady state under different tax policies. Three results are obtained. First, the size of the tax revenue required strongly affects the optimal (welfare maximizing) capital-labor income tax portfolio. In particular, a zero physical capital income tax rate need not be optimal. Second, the way in which the finite life cycle is split between the working and the retirement period also matters. And third, the size of the externality in the human capital production also affects the optimal income tax rate mix. [close]
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Fredriksson, Peter and Björn Öckert (2014).
Life-cycle Effects of Age at School Start.
In: The Economic Journal
124(579)
, 977-1004
.
Abstract.
Link.
In Sweden, children typically start school the year they turn seven. We combine this school entry cut-off with individuals' birthdates to estimate effects of school starting age (SSA) on educational attainment and long-run labour market outcomes. We find that school entry age raises educational attainment and show that postponing tracking until age 16 reduces the effect of SSA on educational attainment. On average, SSA only affects the allocation of labour supply over the life-cycle and leaves prime-age earnings unaffected. But for individuals with low-educated parents, we find that prime-age earnings increase in response to age at school start. [close]
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Gordo, Laura Romeu and Vegard Skirbekk (2013).
Skill demand and the comparative advantage of age: Jobs tasks and earnings from the 1980s to the 2000s in Germany.
In: Labour Economics
22
, 61-69
.
Abstract.
Link.
We study the impact of rapid technological change on age and cohort variation in type of work and wages among German men for the 1986–2006 period. Using a task-based approach, we analyze the consequences that technological progress had on changes in the distribution of tasks performed by the men and the relative wages they received. Technological changes implied fewer physically demanding job tasks and a growing use of cognitive skills, particularly tasks where fluid cognitive abilities are important. A number of earlier physiological and cognitive studies suggest that younger workers have a comparative advantage in terms of physically demanding work and fluid cognitive abilities.
Our findings confirm that while physical task use has generally decreased for most age groups, workers in their 50s experienced a more rapid growth not only in cognitively intense tasks than those in their 30s, but also in tasks that were intense in the use of fluid cognitive abilities. Following cohorts over time, we find that all cohorts, also when education was controlled for, experienced a rapid increase in fluid task use by the 2000s. Further, the relative earnings of those in their 50s compared to younger age groups increased – possibly as result of a shift towards cognitively based work tasks where age-earnings curves are relatively steep. [close]
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Gradstein, Mark and Michael Kaganovich (2004).
Aging Population and Education Finance.
In: Journal of Public Economics
88(12)
, 2469-2485
.
Abstract.
Link.
Conventional wisdom suggests that aging of population will increase political pressure to tilt the composition of social spending in favor of the elderly, while potentially sacrificing other publicly provided goods such as education. This view seems to be supported by recent empirical findings that per child public education spending tends to be lower in US jurisdictions with higher fraction of elderly residents. Do these cross-sectional findings also carry the dynamic implication that longevity will lead over time to waning political support for funding of public education? This paper challenges such implication. We present a model that is consistent with the aforementioned cross-sectional regressions yet predicts an overall positive impact of increasing longevity on public education funding and economic growth. [close]
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Green, David A. and W. Craig Riddell (2013).
Ageing and literacy skills: Evidence from Canada, Norway and the United States.
In: Labour Economics
22
, 16-29
.
Abstract.
Link.
We study the relationship between age and literacy skills in Canada, Norway and the U.S. — countries that represent a wide range of literacy outcomes — using data from the 1994 and 2003 International Adult Literacy Surveys. In cross-sectional data there is a weak negative partial relationship between literacy skills and age. However, this relationship could reflect some combination of age and cohort effects. In order to identify age effects, we use the 1994 and 2003 surveys to create synthetic cohorts. Our analysis shows that the modest negative slope of the literacy-age profile in cross-sectional data arises from offsetting ageing and cohort effects. Individuals from a given birth cohort lose literacy skills after they leave school at a rate greater than indicated by cross-sectional estimates. At the same time, more recent birth cohorts have lower levels of literacy. All three countries show similar patterns of skill loss with age, as well as declining literacy across successive cohorts. [close]
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Harris, Amy, William Evans and Robert Schwab (2001).
Education Spending in an Aging America.
In: Journal of Public Economics
81 (3)
, 449-472
.
Abstract.
Link.
In this paper we use a national panel of public school districts to study the impact of an aging population on public education spending. In contrast to previous analyses that use state-level data, we find that the elderly have only a modest overall negative effect on education spending at the district level. Our results confirm, however, that a growing share of elderly at the state level tends to depress state spending on education. These results are consistent with the hypothesis that the elderly believe only higher local spending is capitalized into house values. [close]
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Hsu Joanne W. (2016).
Aging and Strategic Learning: The Impact of Spousal Incentives on Financial Literacy.
In: Journal of Human Resources
51(4)
, 1036-67
.
Abstract.
Link.
Women tend to be less financially literate than men, consistent with a division of labor where husbands manage finances. However, women tend to outlive their husbands. I find that older women acquire financial literacy as they approach widowhood—80 percent would catch up with their husbands by the expected onset of widowhood. These gains are not attributable to husbands’ cognitive decline, as captured by cognition tests. The results are consistent with a model in which the division of labor collapses when a spouse dies: Women have incentives to delay acquiring financial human capital but also to begin learning before widowhood. [close]
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Jaag, Christian (2009).
Education, Demographics, and the Economy.
In: Journal of Pension and Finance
8(2)
, 189-223
.
Abstract.
Link.
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. The model 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. [close]
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Johnson, Richard (1996).
The Impact of Human Capital Investments on Pension Benefits.
In: Journal of Labor Economics
14(3)
, 520-554
.
Abstract.
Link.
This article develops a model, with deferred compensation and severance pay, that predicts that workers bear all the costs and receive all the returns of human capital investments and that specific investments yield higher returns than general investments. This model also predicts that pensions, which efficiently defer compensation, will be positively related to specific investments. Evidence from the National Longitudinal Survey of Older Men confirms these predictions; participation in company-sponsored training programs, proxying for specific investments, increases the probability of pension receipt and the level of benefits. More general training outside the firm has much smaller effects on pensions. [close]
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Kemnitz, Alexander (2000).
Social Security, Public Education, and Growth in a Representative Democracy.
In: Journal of Population Economics
13(3)
, 443-462
.
Abstract.
Link.
This paper studies the relationship between public education and pay-as-you-go social security in a representative democracy, where the government reacts both to voting and lobbying activities of workers and pensioners. While an intergenerational conflict prevails concerning actual social security contributions, workers may prefer public education for its positive effect on later pension benefits. Population aging diminishes the relative lobbying power of pensioners, leading to a higher contribution rate, educational expansion, and higher per capita income growth. [close]
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Kemnitz, Alexander (1999).
Demographic Structure and the Political Economy of Education Subsidies.
In: Public Choice
101(3-4)
, 235-249
.
Abstract.
Link.
This paper investigates the politico-economic impact of a society's age structure on the extent of public funding of education. Education subsidies serve to internalize positive spillovers of human capital investment, but redistribute resources from the working old to the non-working young, thus creating a conflict of interest between the two generations. The political process is characterized by a representative democracy. In the steady state, high rates of population growth lead to oversubsidization, while low rates lead to undersubsidization, relative to a lifetime income maximizing situation. Population aging leads to higher educational subsidies in the politico-economic equilibrium. Starting from a situation of undersubsidization, this raises lifetime incomes. [close]
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Kluge, Fanny, Emilio Zagheni, Elke Loichinger and Tobias Vogt (2014).
The Advantages of Demographic Change after the Wave: Fewer and Older, but Healthier, Greener, and More Productive?.
In: PLoS ONE
9
.
Abstract.
Link.
Population aging is an inevitable global demographic process. Most of the literature on the consequences of demographic change focuses on the economic and societal challenges that we will face as people live longer and have fewer children. In this paper, we (a) briefly describe key trends and projections of the magnitude and speed of population aging; (b) discuss the economic, social, and environmental consequences of population aging; and (c) investigate some of the opportunities that aging societies create. We use Germany as a case study. However, the general insights that we obtain can be generalized to other developed countries. We argue that there may be positive unintended side effects of population aging that can be leveraged to address pressing environmental problems and issues of gender inequality and intergenerational ties. [close]
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Ludwig, Alexander and Edgar Vogel (2010).
Mortality, Fertility, Education and Capital Accumulation in a Simple OLG Economy.
In: Journal of Population Economics
23(2)
, 703-735
.
Abstract.
Link.
We develop a simple OLG model to analytically show that aging leads to increased educational efforts through a general equilibrium effect. The mechanism is that scarcity of raw labor increases the return of human relative to physical capital. While a reduction in the birth rate is shown to unambiguously increase educational efforts, increases in the survival rate have ambiguous effects. Falling birth rates also increase capital per worker, but the effects of rising survival rates are again ambiguous. We conclude that our model is a useful laboratory to highlight potentially offsetting effects in models with endogenous education and overlapping generations. [close]
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Ludwig, Alexander, Thomas Schelkle and Edgar Vogel (2012).
Demographic change, human capital and welfare.
In: Review of Economic Dynamics
15
, 94-107
.
Abstract.
Link.
Projected demographic changes in the U.S. will reduce the share of the working-age population. Analyses based on standard OLG models predict that these changes will increase the capital–labor ratio. Hence, rates of return to capital decrease and wages increase, which has adverse welfare consequences for current cohorts who will be retired when the rate of return is low. This paper argues that adding endogenous human capital accumulation to the standard model dampens these forces. We find that this adjustment channel is quantitatively important. The standard model with exogenous human capital predicts welfare losses up to 12.5%12.5% (5.6%5.6%) of lifetime consumption, when contribution (replacement) rates to the pension system are kept constant. These numbers reduce to approximately 8.7%8.7% (4.4%4.4%) when human capital can endogenously adjust. [close]
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MacDonald, Glenn and Michael Weisbach (2004).
The Economics of Has-Beens.
In: Journal of Political Economy
112(1)
, 289-310
.
Abstract.
Link.
The evolution of technology causes human capital to become obsolete. We study this phenomenon in an overlapping generations setting, assuming that technology evolves stochastically and that older workers find updating uneconomic. Experience and learning by doing may offer the old some income protection, but technology advance always turns them into has-beens to some degree. We focus on the determinants (demand elasticities, persistence of technology change, etc.) of the severity of the has-beens effect. It can be large, even leading to negatively sloped within-occupation age-earnings profiles and an occupation dominated by a few young, high-income workers. Architecture displays the sort of features the theory identifies as magnifying the has-beens effect, and both anecdotes and some data suggest that the has-beens effect in architecture is extreme indeed. [close]
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Maestas, Nicole and Julie Zissimopoulos (2010).
How Longer Work Lives Ease the Crunch of Population Aging.
In: The Journal of Economic Perspectives
24
, 139-160
.
Abstract.
Link.
Population aging is not a looming crisis of the future—it is already here. Economic challenges arise when the increase in people surviving to old age and the decline in the number of young people alive to support them cause the growth in society's consumption needs to outpace growth in its productive capacity. The ultimate impact of population aging on our standard of living in the future depends a great deal on how long people choose to work before they retire from the labor force. Here, there is reason for optimism. A constellation of forces, some just now gaining momentum, has raised labor force participation at older ages at just the time it is needed. We examine the most important factors behind the increase in labor force participation realized to date: the shift in the skill composition of the workforce, and technological change. We argue that forces such as changes in the structure of employer-provided pensions and Social Security are likely to propel future increases in labor force participation at older ages. The labor market is accommodating older workers to some degree, and older men and women are themselves adapting on a number of fronts, which could substantially lessen the economic impact of population aging. Age-related health declines and the reluctance of employers to hire and retain older workers present challenges, but the outlook for future gains in labor force participation at older ages is promising. [close]
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Mitrut, Andreea and François-Charles Wolff (2014).
Investing in children's education: are Muslim immigrants different?.
In: Journal of Population Economics
27(4)
, 999-1022
.
Abstract.
Link.
Using a unique data set on immigrants living in France in 2003, we investigate whether Muslims invest differently in their children’s education compared to non-Muslims. In particular, we want to assess whether educational inequalities between the children of Muslim and non-Muslim immigrants stem from differences between or within families. After controlling for a broad set of individual and household characteristics, we find no difference in education between children of different religions. However, we do find more within-family inequality in children’s educational achievements among Muslims relative to non-Muslims. The within-family variance is 15 % higher among Muslims relative to Catholics and 45 % higher relative to immigrants with other religions, but the intra-family inequality remains difficult to explain. Overall, our results suggest that Muslim parents tend to redistribute their resources more unequally among their children. [close]
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Neuman, Shoshana and Avi Weiss (1995).
On the Effects of Schooling Vintage on Experience Earnings Profiles - Theory and Evidence.
In: European Economic Review
39(5)
, 943-955
.
Abstract.
Link.
In this paper a distinction is made between human capital depreciation related to a worker's aging and depreciation due to the obsolescence of the worker's education. Schooling-specific obsolescence of human capital is incorporated in the Mincerian model of earnings, and it is shown how this obsolescence affects the worker's earnings profile. Using the Israeli 1983 Census we show that for 'high-tech' oriented industries (for which obsolescence is relatively important) obsolescence effects are more significant than for 'low-tech' oriented industries, and, consequently, the experience-earnings peak falls faster with increasing education in the former. [close]
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Omori, Tatsuya (2009).
Effects of Public Education and Social Security on Fertility.
In: Journal of Population Economics
22(3)
, 585-601
.
Abstract.
Link.
Introducing a fertility decision and child care cost into an overlapping generations model with public education and social security, we examine the effects of these public policies on fertility. We show that an increase in income tax, which finances social security benefits and public investment in education, increases fertility. On the other hand, with a constant tax rate, a change in the allocation from social security benefits to public investment in education decreases fertility and, with a constant social security tax, the effect of education tax on fertility is neutral. [close]
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Pecchenino, Rowena and Patricia Pollard (2002).
Dependent Children and Aged Parents: Funding Education and Social Security in an Aging Economy.
In: Journal of Macroeconomics
24(2)
, 145-169
.
Abstract.
Link.
In the last few decades in the United States birth rates have declined and longevity has risen while productivity growth has slowed. Given such changes, the increasing burden of funding programs for the elderly is likely to shift resources away from the young and toward the elderly. This paper uses an overlapping generations framework to examine the effects of tax policies on an aging economy. We find that if the quality of the education system is sufficiently high then raising the education tax rate and subsequently lowering the social security tax rate enhances growth and welfare. [close]
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Ponzo, Michela and Vincenzo Scoppa (2014).
The long-lasting effects of school entry age: Evidence from Italian students.
In: Journal of Policy Modeling
36(3)
, 578-599
.
Abstract.
Link.
Using data for 9, 13 and 15-year-old students from three different datasets (PIRLS-2006, TIMSS-2007 and PISA-2009), we investigate whether the age at school entry affects children school performance at the fourth, eighth and tenth grade levels. Since student's age in a grade may be endogenous, we use an instrumental variable estimation strategy exploiting the exogenous variations in the month of birth coupled with the entry school cut-off date. We find that younger children score substantially lower than older peers at the fourth, the eighth and the tenth grade. The advantage of older students does not dissipate as they grow older. We do not find any significant effect of the relative age of a child with respect to the classmates’ age. Finally, we show that secondary school students are more likely to be tracked in more academic schools rather than in vocational schools if they are born in the early months of the year. From a policy point of view our results suggest that it might be useful to postpone the entry at school of children, or at least pupils should be prevented to anticipate the age of their entry at school. Tracking should also be delayed. [close]
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Poterba, James (1997).
Demographic Structure and the Political Economy of Public Education.
In: Journal of Policy Analysis and Management
16(1)
, 48-66
.
Abstract.
Link.
This article examines the relationship between demographic structure and the level of government spending on K-12 education. Panel data for the states of the United States over the 1960-1990 period suggests that an increase in the fraction of elderly residents in a jurisdiction is associated with a significant reduction in per-child educational spending. This reduction is particularly large when the elderly residents and the school-age population are front different racial groups. Variation in the size of the school-age population does nor result in proportionate changes in education spending, thus, students in states with larger school-age populations receive lower per-student spending than those in stares with smaller numbers of potential students. These results provide support for models of generational competition in the allocation of public sector resources. They also suggest that the effect of cohort size on government mediated transfers must be considered in analyzing how cohort size affects economic well-being. [close]
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Prskawetz, Alexia, Tsvetomir Tsachev and Vladimir M. Veliov (2012).
OPTIMAL EDUCATION IN AN AGE-STRUCTURED MODEL UNDER CHANGING LABOR DEMAND AND SUPPLY.
In: Macroeconomic Dynamics
16(2)
, 159-183
.
Abstract.
Link.
We introduce a model of the optimal education policy at the macro level, allowing for heterogeneity of the workforce with respect to its age and qualification skills. Within this framework we study the optimal education rate in the context of changes in labor demand (as represented by the elasticity of substitution across ages and qualification) and labor supply (as represented by a change in the population growth rates). Applying an age-structured optimal-control model, we derive features of the optimal age-specific education rate. Our results show that the relation between the elasticities of substitution of labor across ages plays a crucial role in the way the demographic changes affect (both in the short and in the long run) the optimal educational policy. We also show that under imperfect substitutability across age and qualification groups, the optimal educational policy is adjusted in advance to any change in the labor supply. [close]
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Rangel, Antonio (2003).
Forward and Backward Intergenerational Goods: Why Is Social Security Good for the Environment?.
In: American Economic Review
93(3)
, 813-834
.
Abstract.
Link.
This paper studies the ability of nonmarket institutions to invest optimally in forward intergenerational goods (FIGs), such as education and the environment, when agents are selfish or exhibit paternalistic altruism. We show that backward intergenerational goods (BIGs), such as social security, play a crucial role in sustaining investment in FIGs: without them investment is inefficiently low, but with them optimal investment is possible. We also show that making the provision of BIGs mandatory crowds out the voluntary provision of FIGs, and that population aging can increase investment in FIGs. [close]
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Razin, Assaf, Efraim Sadka and Phillip Swagel (2002).
The Aging Population and the Size of the Welfare State.
In: Journal of Political Economy
110(4)
, 900-918
.
Abstract.
Link.
Data for the United States and countries in western Europe indicate a negative correlation between the dependency ratio and labor tax rates and the generosity of social transfers, after other factors that influence the size of the welfare state are controlled for. This occurs despite the increased political clout of the dependent population implied by the aging of the population. This paper develops an overlapping generations model of intra- and intergenerational transfers (including old-age social security) and human capital formation that addresses this seeming puzzle. We show that with democratic voting, an increase in the dependency ratio can lead to lower taxes or less generous social transfers. [close]
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Storesletten, Kjetil (2000).
Sustaining Fiscal Policy Through Immigration.
In: Journal of Political Economy
108(2)
, 300-323
.
Abstract.
Link.
Using a calibrated general equilibrium overlapping generations model, which explicitly accounts for differences between immigrants and natives, this paper investigates whether a reform of immigration policies alone could resolve the fiscal problems associated with the aging of the baby boom generation. Such policies are found to exist and are characterized by an increased inflow of working-age high- and medium-skilled immigrants, One particular feasible policy involves admitting 1.6 million 40-44-year-old high-skilled immigrants annually. These findings are illustrated by computing the discounted government gain of admitting additional immigrants, conditional on their age and skills. [close]
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Sugimoto, Yoshiaki and Masao Nakagawa (2010).
From Duty to Right: The Role of Public Education in the Transition to Aging Societies.
In: Journal of Development Economics
91(1)
, 140-154
.
Abstract.
Link.
This paper argues that the introduction of compulsory schooling in early industrialization promoted the growth process that eventually led to a vicious cycle of population aging and negative pressure on education policy. In the early phases of industrialization, public education was undesirable for the young poor who relied on child labor. Compulsory schooling therefore discouraged childbirth, while the accompanying industrialization stimulated their demand for education. The subsequent rise in the share of the old population, however, limited government resources for education, placing heavier financial burdens on the young. This induced further fertility decline and population aging, and the resulting cycle may have delayed the growth of advanced economies in the last few decades. [close]
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Tosun, Mehmet (2008).
Endogenous Fiscal Policy and Capital Market Transmissions in the Presence of Demographic Shocks.
In: Journal of Economic Dynamics and Control
32(6)
, 2031-2060
.
Abstract.
Link.
Previous analyses of population aging mainly focused on the social security implications of the aging trend. This paper addresses aging in an open economy framework with two regions that have politically responsive fiscal policy regarding education finance. Demographic shocks start an economic growth process but results are sensitive to a critical parameter in the model that indicates return to education spending. Low values of this parameter are associated with less favorable economic outcomes. Hence, a policy implication emerges that enhancing the education system might pay off in terms of easing the negative growth and welfare consequences of expected demographic shocks. [close]
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Van Zon, Adriaan and Joan Muysken (2001).
Health and Endogenous Growth.
In: Journal of Health Economics
20(2)
, 169-185
.
Abstract.
Link.
The focus of endogenous growth theory on human capital formation and the physical embodiment of knowledge in people, suggests the integration of the growth supporting character of health production and the growth generating services of human capital accumulation in an endogenous growth framework. We show that a slow down in growth may be explained by a preference for health that is positively influenced by a growing income per head, or by an ageing population. Growth may virtually disappear for countries with high rates of decay of health, low productivity of the health-sector, or high rates of discount. [close]
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Vogel Edgar, Alexander Ludwig and Axel Börsch-Supan (2013).
Aging and pension reform: extending the retirement age and human capital formation.
NBER Working Paper 18856.
Abstract.
Link.
Projected demographic changes in industrialized and developing countries vary in extent and timing but will reduce the share of the population in working age everywhere. Conventional wisdom suggests that this will increase capital intensity with falling rates of return to capital and increasing wages. This decreases welfare for middle aged agents with assets accumulated for retirement. This paper addresses three important adjustments channels to dampen these detrimental effects of ageing: investing abroad, endogenous human capital formation and increasing the retirement age. Although non of these suggestions is new in itself, we examine their effects jointly in one coherent model. Our quantitative finding is that openness has a relatively mild effect. In contrast, endogenous human capital formation in combination with an increase in the retirement age has strong effects. Under these adjustments maximum welfare losses of demographic change for households alive in 2010 are reduced by about 3 percentage points. [close]
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Weinberg, Bruce (2001).
Long-Term Wage Fluctuations With Industry-Specific Human Capital.
In: Journal of Labor Economics
19(1)
, 231-264
.
Abstract.
Link.
Exploiting long term interindustry demand shifts, this article provides evidence that (1) industry-level wages do not respond to industry demand conditions; (2) at the industry level, the employment of young workers responds more to demand shifts than does the employment of experienced workers; and (3) the postdisplacement wages of displaced workers are strongly affected by demand in their predisplacement industries. These findings are consistent with a model in which worker's investments in industry-specific skills pose a barrier to interindustry labor mobility and wages do not respond to spot labor market conditions. [close]
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Zhang, Junsen, Jie Zhang and Tianyou Li (1999).
Gender Bias and Economic Development in an Endogenous Growth Model.
In: Journal of Development Economics
59(2)
, 497-525
.
Abstract.
Link.
This paper develops an endogenous growth model with an explicit gender choice to study interactions between gender bias and economic development. Both sex preference and differential human capital endowments are possible sources of gender bias. Human capital and sex ratios of men and women converge to values that are lower in the steady-state growth equilibrium than in the stagnant equilibrium when old-age support from children is absent, and lower than in the steady-state growth equilibrium when old-age support is present. The analysis shows the crucial role of perpetual growth in reducing gender gaps in terms of the sex ratio and human capital ratio of men and women. Simulation results mimic some important features in the time series of the US economy. [close]
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van Kippersluis, Hans, Owen O’Donnell and Eddy van Doorslaer (2011).
Long-Run Returns to Education - Does Schooling Lead to an Extended Old Age?.
In: Journal of Human Resources
46(4)
, 695-721
.
Abstract.
Link.
While there is no doubt that health is strongly correlated with education, whether schooling exerts a causal impact on health is not firmly established. We exploit a Dutch compulsory schooling law to estimate the causal effect of education on mortality. The reform provides a powerful instrument, significantly raising years of schooling, which, in turn, has a significant and robust negative effect on mortality. For men surviving to age 81, an extra year of schooling is estimated to reduce the probability of dying before the age of 89 by almost three percentage points relative to a baseline of 50 percent. [close]
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von Gaessler, Anne E. and Thomas Ziesemer (2016).
Optimal Education in Times of Ageing: The Dependency Ratio in the Uzawa-Lucas Growth Model.
In: Journal of the Economics of Ageing
7
, 125-142
.
Abstract.
The increasing share of retirees puts pressure on the shrinking working generation which will need to produce more output per worker to ensure a constant standard of living. We investigate the influence of a changing dependency ratio has on the time individuals spend in education and production. Longer education will increase productivity in the future, but will lower production in the short run, whereas an increase in labour input at the cost of education will provide more production immediately. We introduce a dependency ratio into a discrete-time Uzawa–Lucas model with international capital movements, human capital externalities and decreasing returns to labour in human capital formation. The dependency ratio is defined as the fraction between inactive and active individuals in regard to work or education. By calibration of the model, we find multiple steady states indicated by a u-shaped relation between education time-shares and the growth rate of the dependency ratio. Near the stable, high-level steady state, the optimal response to higher growth of the dependency ratio is more education to enhance productivity. We find evidence for this relation for 16 OECD countries. As a model extension, a debt-dependent interest rate has been introduced and estimated. [close]