Demographic change, wage inequality, and technology

Abstract

This chapter investigates the consequences of population ageing and demographic change for the long-run performance of the economies from the perspective of wage inequality and technology intensity. 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 total high-skilled labour and a lower skill premium. However, the alternative directed technical change model may imply a rising skill premium depending on the elasticity 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 in the end of the XXth century.