Age-specific dynamic labor demand and human capital investment

To study the optimal age-specific labor demand and human capital investment at the firm level we extend the standard dynamic labor demand model by introducing ‘age’ as a second dynamic variable and distinguish between two types of workers: ‘low skilled’ and ‘high skilled’. Applying an age-structured optimal control model we derive qualitative features of the optimal age-specific hiring and training effort. For the case of a linear revenue and production function we prove that firms do not anticipate changes in adjustment costs in their optimal decisions. This result no longer holds if a nonlinear revenue or production function is considered.     

The accomplishment of the Maastricht criteria with respect to initial debt

The reduction of government debt to 60% of the GDP in order to satisfy the requirements of the Maastricht Treaty for participation in the European Monetary Union is one of the primary economic-policy goals for most of the European Union countries. The first aim of the present paper is to characterize the optimal path of the primary surplus that leads to the achievement of this Maastricht target. Using optimal-control theory we are able to determine an upper bound of the public-debt-to-GDP ratio above which no retrenchment policy becomes effective. The second issue taken up is that of the sensitivity analysis with respect to the initial level of the debt-to-GDP ratio, the growth rate of the economy, the interest rate, the inflation rate, and the inverse of the velocity of the monetary base circulation.     

WORKFORCE AGEING AND THE SUBSTITUTION OF LABOUR: THE ROLE OF SUPPLY AND DEMAND OF LABOUR IN AUSTRIA

We study the sensitivity of projected economic productivity (output per worker) with respect to alternative projections of labour supply and alternative assumptions on the substitutability of workers at different ages. We show that in a pure labour economy assuming imperfect substitution of workers at different ages implies an increase in relative productivity during the next two decades. For a decreasing or hump‐shaped age‐specific productivity profile a negative tradeoff between an increasing labour force at older ages and aggregate productivity results. A decline in productivity can be attenuated by adjusting labour force participation rates to levels currently observed in Nordic countries.     

Ageing, productivity and wages in Austria: sector level evidence

In this paper we analyse the link between the age structure of the labour force and average labour productivity as well as average wage across industrial sectors. While this intermediate economic level has been under-explored up to now, we will argue that it provides valuable insights in several respects. Our analysis is based on a panel data set ranging over 6 years (2002–2007). It covers the sectors of mining, manufacturing and market oriented services in the Austrian economy. Our results exhibit a positive correlation of the share of older employees and productivity, whereas we cannot find any evidence for a significant relationship of the share of younger employees and productivity. Moreover, the estimated age-wage pattern does not hint at an over-payment of older employees.     

Agricultural Productivity Growth and Escape from the Malthusian Trap

Industrialization allowed the industrialized world of today to escape from the Malthusian regime characterized by low economic and population growth and to enter the post-Malthusian regime of high economic and population growth. To explain the transition between these regimes, we construct a growth model with two consumption goods (an agricultural and a manufacturing good), endogenous fertility, and endogenous technological progress in the manufacturing sector. We show that with an exogenous increase in the growth of agricultural productivity our model is able to replicate stylized facts of the British industrial revolution. The paper concludes by illustrating that our proposed model framework can be extended to include the demographic transition, i.e., a regime in which economic growth is associated with falling fertility.     

The effects of age structure on economic growth: An application of probabilistic forecasting to India

During recent years there has been an increasing awareness of the explanatory power of population age structure variables in economic growth regressions. We estimate a new cross-country regression model of the effects of age structure change on economic growth. We use the new model and recent probabilistic demographic forecasts for India to derive the uncertainty of predicted economic growth rates caused by the uncertainty in demographic developments.     

A brain gain with a brain drain

"We study human capital depletion and formation in an economy open to out-migration, as opposed to an economy which is closed. Under the assumption of asymmetric information, the enlarged opportunities and the associated different structure of incentives can give rise to a brain gain in conjunction with a brain drain. Migration by high-skill members of its workforce notwithstanding, the home country can end up with a higher average level of human capital per worker."     

The past and future of knowledge-based growth

This paper consolidates two previously disconnected literatures. It integrates R&D-based innovations into a unified growth framework with micro-founded fertility and schooling behavior. The theory suggests a refined view on the human factor in productivity growth. It helps to explain the historical emergence of R&D-based growth and the subsequent emergence of mass education and the demographic transition. The model predicts that the erstwhile positive correlation between population growth and innovative activity turns negative during economic development. This “population-productivity reversal” explains why innovative modern economies are usually characterized by low or negative population growth. Because innovations in modern economies are based on the education of the workforce, the medium-run prospects for future economic growth—when fertility is going to be below replacement level in virtually all developed countries—are better than suggested by conventional R&D-based growth theories.     

The public reallocation of resources across age: a comparison of Austria and Sweden

There is a strong interdependency between public transfers and the shape of the economic lifecycle because these transfers facilitate and enable the decoupling of production and consumption over long time periods, most notably in childhood and retirement. The design of public transfers obviously influences the production and consumption and consequently also the degree of economic dependency of children and the elderly. We propose economic dependency ratios which are based on age-specific consumption and labour income or age-specific public contributions/benefits, respectively, illustrating them in a comparison of Austria and Sweden. Although these two countries are very similar economies in terms of production, income and the size of the public sector, there are remarkable differences in the design of public transfers, in their distribution over age-groups and consequently in the shape of the average economic lifecycle. Using the economic dependency ratios we show that the financial sustainability of the public transfer system depends beside the demographic developments strongly on its design: the Swedish system collects the contributions from a wider range of age groups, transfers a smaller share to the elderly and provides more support to younger generations, supporting them to invest in children of their own. These characteristics have a positive effect on the sustainability of the Swedish system: although in Sweden there is a larger share of the population in the age group 60+, the total economic dependency of elderly persons is lower.