Abstract
We add endogenous labour supply to exogenous population growth in an Uzawa-Lucas endogenous growth model with international capital movements. Under non-linearity from a decreasing marginal product of labour in education and a positive human capital externality in output production, a combination of an estimated debt-interest relation and a realistic calibration of the model shows the following. (i) The demographic dividends from a fall in the population growth rate increase welfare in the short run and reduce it in the long run. (ii) A higher (lower) growth rate of the dependency ratio leads to a higher (lower) optimal level of education and technical change. (iii) Lower past cumulated savings lead to a higher foreign-debt/GDP ratio, higher interest rates, more education time and technical change, and more consumption in the future rather than the present. (iv) A higher depreciation rate of human capital through ageing has a stronger impact on growth rates than all other variables that could be associated with ageing and a good mitigating policy is to spend more time on education.
Original language | English |
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Pages (from-to) | 129-160 |
Number of pages | 32 |
Journal | Portuguese Economic Journal |
Volume | 20 |
Issue number | 2 |
Early online date | 19 Jun 2020 |
DOIs | |
Publication status | Published - May 2021 |
Keywords
- Ageing
- Human capital
- Endogenous growth
- Open economy
- SKILL PORTFOLIO EVIDENCE
- LIFE EXPECTANCY
- SECULAR STAGNATION
- TECHNICAL CHANGE
- ECONOMIC-GROWTH
- POPULATION
- MORTALITY
- TRENDS
- AGE
- SUBSTITUTION