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Decreasing Fertility, Economic Growth and the Intergenerational Wage Gap

    Klaus Prettner, Alexia Prskawetz

VID Working Papers, pp. 1-24, 2021/12/02

doi: 10.1553/0x003d08fe


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doi:10.1553/0x003d08fe

Abstract

Persistent low fertility rates lead to lower population growth rates and eventually also todecreasing population sizes in most industrialized countries. There are fears that thisdemographic development is associated with declines in per capita GDP and possiblyalso increasing inequality of the wage distribution. We investigate whether this is true inthe context of neoclassical growth models, augmented with endogenous fertility decisionsand endogenous educational decisions. Furthermore we allow for imperfectsubstitutability across workers of different age in the production process and learning bydoing effects as well as human capital depreciation. In particular, we assess theintergenerational wage redistribution effects which follow after a demographic change topersistent low fertility rates.

Keywords: Population decline, economic growth, intergenerational wage gap