Demography, growth, and inequality (Q2636848)

The authors ``have introduced a general demographic structure into the endogenous growth model of \textit{P. M. Romer} [``Increasing returns and long-run growth'', J. Polit. Econ. 94, No. 5, 1002--1037 (1986), \url{http://www.jstor.org/stable/1833190}].'' In the theoretical part of the paper, they ``have shown that, inter alia, the demographic structure inflicts a negative drag on aggregate consumption and that the resulting equilibrium growth rate is less than the growth rate that prevails in the representative agent model. Furthermore, using a novel approach to linearize the model around the balanced growth path, they have established that the model is locally unstable and that, therefore, the equilibrium is one in which the economy is characteristic of the basic Romer model.'' The authors have applied the model to conduct three sets of numerical simulations. In the first, they have established that the consequences of a change in the population growth rate for the economic growth rate differ substantially, depending on the source of the demographic change. In the second, they have studied the relationship between a changing demographic structure and the natural rate of wealth inequality. In the third, they have considered how the demographic transition experienced by the United States during the latter part of the twentieth century has affected the economic growth rate and degree of wealth inequality over that period. The paper is structured as follows. ``Section 2 introduces the model and Section 3 discusses its macroeconomic equilibrium properties. Section 4 reports the numerical simulations, including some robustness analyses of the key results. Section 5 concludes, and the appendix contains the technical details, including detailed proofs of the propositions.''