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Wealth creation, wealth dilution and population dynamics

Author

Listed:
  • Christa N. Brunnschweiler

    (University of East Anglia)

  • Pietro F. Peretto

    (Duke University)

  • Simone Valente

    (University of East Anglia)

Abstract

Wealth creation driven by R&D investment and wealth dilution caused by disconnected generations interact with households' fertility decisions, delivering a theory of sustained endogenous output growth with a constant endogenous population level in the long run. Unlike traditional theories, our model fully abstracts from Malthusian mechanisms and provides a demography-based view of the long run where the ratios of key macroeconomic variables - consumption, labor incomes and financial assets - are determined by demography and preferences, not by technology. Calibrating the model parameters on OECD data, we show that negative demographic shocks induced by barriers to immigration or increased reproduction costs may raise growth in the very long run, but reduce the welfare of a long sequence of generations by causing permanent reductions in the mass of firms and in labor income shares, as well as prolonged stagnation during the transition.

Suggested Citation

  • Christa N. Brunnschweiler & Pietro F. Peretto & Simone Valente, 2017. "Wealth creation, wealth dilution and population dynamics," University of East Anglia School of Economics Working Paper Series 2017-04, School of Economics, University of East Anglia, Norwich, UK..
    • Handle: RePEc:uea:ueaeco:2017_04
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    References listed on IDEAS

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    Cited by:

    1. Morimoto, Takaaki & Tabata, Ken, 2020. "Higher Education Subsidy Policy And R&D-Based Growth," Macroeconomic Dynamics, Cambridge University Press, vol. 24(8), pages 2129-2168, December.
    2. MADSEN, Jakob B, 2018. "Is Inequality Increasing in r-g? The Dynamics of Capital’s Income Share in the UK, 1210-2013," Discussion paper series HIAS-E-70, Hitotsubashi Institute for Advanced Study, Hitotsubashi University.
    3. Tabata, Ken, 2024. "Redistributive policy and R&D-based growth," Journal of Macroeconomics, Elsevier, vol. 79(C).

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    More about this item

    Keywords

    R&D-based growth; overlapping generations; endogenous fertility; population level; wealth dilution;
    All these keywords.

    JEL classification:

    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution

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