This project studies the effects on (future) per capita economic growth of different drivers of demographic change and rising inequality in OECD countries. We focus on the effects of (i) declining fertility, (ii) rising life expectancy, (iii) skill-biased technical change and (iv) the intergenerational transmission of heterogeneous innate ability and accumulated financial wealth (bequests).
Methodologically, we construct, calibrate, validate, and simulate two general equilibrium models with overlapping generations (OLG) of altruistic parents and children. Key endogenous variables in our models are employment, the retirement decision of older workers, physical capital formation, education and human capital formation, economic growth and income, welfare, and welfare inequality.
Our research should allow us to answer two major questions. The first is whether demographic change, skill-biased technical change, and the intergenerational transmission of ability and financial wealth are pushing OECD countries into a very long period of poor per capita growth (a so-called secular stagnation) and rising inequality. The second is what public policies (mainly fiscal policies) are the most appropriate to cope with these challenges. We think of tax policies (e.g. taxes on wealth and inheritances) and different types of government spending (e.g. education spending), among others.