Human capital accumulation and the macroeconomy in an ageing society

Time: 13.00-14.00 hours
Location: CPB-office, Van Stolkweg 14, The Hague

Presentation: Ben Heijdra and Laurie Reijnders (RUG)

Discussant: Ed Westerhout (CPB)

Language: English

Registration:  Please register by sending an email to seminars@cpb.nl.

Abstract subject: How does the demographic structure of the population affect the long-run macroeconomic performance of an economy? To answer this question we build a general equilibrium overlapping  generations model of a closed economy featuring endogenous factor prices. Finitely-lived individuals are endowed with perfect foresight and make optimal choices over the life cycle. In addition to selecting age profiles for consumption and the hours of time supplied to the labour market, they also choose their schooling level and retirement age. Human capital is accumulated as a result of work experience, the extent of which is determined by the intensity of labour supply. As the agent gets older, biological deterioration sets in and human capital depreciates at an increasing rate. This ultimately prompts the agent to withdraw from the labour market. The microeconomic and macroeconomic effects of three demographic shocks are studied, namely a biological longevity boost, a comprehensive longevity boost, and a baby bust. Robustness checks are performed by allowing for capital market imperfections and indivisibility of labour supply.

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