Demographic Change, Wage Inequality, and Technology

What is it about?

This chapter investigates the consequences of population ageing and demographic change for the long-run performance of economies from the perspective of wage inequality and technology intensity in the process of development. To that end, we devise two alternative models of endogenous growth with demographic variables. In the baseline model, a lower birth rate or a higher mortality rate implies a lower share of R&D workers in high-skilled labour population and a lower skill premium. However, the alternative directed technical change model may imply a rising skill premium following declines in the birth and the death rates for different elasticities of substitution. Quantitatively , it is shown that the decline in the birth rate and consequently ageing may help explain the increase in the skill premium and the decline in the R&D intensity observed at the end of the XXth century, with non-negligible effects.

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