Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/146690
Authors: 
Geppert, Christian
Ludwig, Alexander
Abiry, Raphael
Year of Publication: 
2016
Series/Report no.: 
SAFE Working Paper Series 145
Abstract: 
Ongoing demographic change will lead to a relative scarcity of raw labor to the effect that output growth will be decreasing in the next decades, a secular stagnation. As physical capital will be relatively abundant, this decrease of output will be accompanied by reductions of asset returns. We quantify these effects for the US economy by developing an overlapping generations model with risky and risk-free assets. Without adjustments of human capital, risky returns decrease until 2035 by about 0.7 percentage point, and the risk-free rate by about one percentage point, leading to substantial welfare losses for asset rich households. Per capita output is reduced by 6%. Endogenous human capital adjustments strongly mitigate these effects. We conclude that human capital policies will be crucial in the context of labor shortages.
Subjects: 
secular stagnation
demographic change
overlapping generations
natural rate
equity premium
growth
welfare
human capital
JEL: 
E17
C68
G12
Document Type: 
Working Paper

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