Endogenous Working Hours, Overlapping Generations and Balanced Neoclassical Growth

E-print/Working paper (2023)

A balanced growth path that accounts for a decline in hours worked per worker approximates the evolution of today’s industrialized countries since 1870. This stylized fact is explained in an OLG-model ... [more ▼]

A balanced growth path that accounts for a decline in hours worked per worker approximates the evolution of today’s industrialized countries since 1870. This stylized fact is explained in an OLG-model featuring two-period lived individuals equipped with per-period utility functions of the generalized loglog type proposed by Boppart and Krusell (2020) and a neoclassical production sector. Technological progress drives real wages up and expands the amount of consumption goods. The value of leisure increases, and the supply of hours worked declines. Technological progress moves a poor economy out of a regime with low wages and an inelastic supply of hours worked into a regime with high wages and a declining supply of hours worked. The balanced growth path is unique and stable. In the high wage regime, the equilibrium difference equation is available in closed form. A balanced growth path with declining hours worked may also be obtained with endogenous technological progress as in Romer (1986). [less ▲]

Population Aging and Inventive Activity

in Macroeconomic Dynamics (2022), 26

This research empirically establishes and interprets the hypothesis that the relationship between population aging and inventive activity is hump-shaped. We estimate a reduced form, hump-shaped ... [more ▼]

This research empirically establishes and interprets the hypothesis that the relationship between population aging and inventive activity is hump-shaped. We estimate a reduced form, hump-shaped relationship in a panel of 33 OECD countries over the period 1960–2012, as well as in a panel of 248 NUTS 2 regions in Europe over the period 2001–2012. The increasing part of the hump may be associated with various channels including the acknowledgement that population aging requires inventive activity to guarantee current and future standards of living, or the observation that older educated workers are more innovative than their young peers. The decreasing part may reflect the tendency of aging societies to lose dynamism and the willingness to take risks. [less ▲]

The Implications of Population Aging for Immigrant- and Gender-Related Attitudes

in Bloom, David E.; Sousa-Poza, Alfonso; Sunde, Uwe (Eds.) The Routledge Handbook of the Economics of Ageing (2022)

Population aging is an ongoing societal transformation that has major economic implications for countries worldwide at all stages of development. Various facets of this phenomenon have been explored over ... [more ▼]

Population aging is an ongoing societal transformation that has major economic implications for countries worldwide at all stages of development. Various facets of this phenomenon have been explored over the years with a particular focus on the implications for economic development, pension schemes, and the welfare state in general. Yet, neither the social nor the cultural implications of population aging have received adequate attention. This chapter sheds light on whether and how population aging affects immigrant-related and gender-related attitudes. Population aging reduces the working-age population and increases the pool of the economically dependent old. These tendencies create a need for an expansion of the labor force to mitigate the adverse effects on aggregate output. To meet this challenge, policies that expand the domestic labor supply with immigrants and females are called for. However, the attitudes in the population toward these social groups will determine whether such policies are implemented and successful. The link between population aging and immigrant- and gender-related attitudes is also important because the process of population aging may change the prevailing attitudes in a society. Immigrant- and gender-related attitudes are a case in point. As the understanding of the economic necessity to expand the domestic labor force with immigrants and females spreads, the standing of these social groups is likely to increase and hence, the attitudes toward immigrants and females become more favorable. Through this channel, population aging itself may facilitate the implementation of policies that expand the labor supply with these social groups. [less ▲]

Automation, Growth, and Factor Shares in the Era of Population Aging

Presentation (2021)

How does population aging affect economic growth and factor shares in times of increasingly automatable production processes? The present paper addresses this question in a new macroeconomic model of ... [more ▼]

How does population aging affect economic growth and factor shares in times of increasingly automatable production processes? The present paper addresses this question in a new macroeconomic model of automation where competitive firms perform tasks to produce output. Tasks require labor and machines as inputs. New machines embody superior technological knowledge and substitute for labor in the performance of tasks. Automation is labor-augmenting in the reduced-form aggregate production function. If wages increase then the incentive to automate becomes stronger. Moreover, the labor share declines even though the aggregate production function is Cobb–Douglas. Population aging due to a higher longevity reduces automation in the short and promotes it in the long run. It boosts the growth rate of absolute and per-capita GDP in the short and the long run, lifts the labor share in the short and reduces it in the long run. Population aging due to a decline in fertility increases automation, reduces the growth rate of GDP, and lowers the labor share in the short and the long run. In the short run, it may or may not increase the growth rate of per-capita GDP, in the long run it unequivocally accelerates per-capita GDP growth. [less ▲]

The supply of hours worked and fluctuations between growth regimes

Scientific Conference (2021)

Declining hours of work per worker in conjunction with a growing work force may give rise to fluctuations between growth regimes. This is shown in an overlapping generations model with two-period lived ... [more ▼]

Declining hours of work per worker in conjunction with a growing work force may give rise to fluctuations between growth regimes. This is shown in an overlapping generations model with two-period lived individuals endowed with Boppart-Krusell preferences (Boppart and Krusell (2020)). On the supply side, economic growth is due to the expansion of consumption-good varieties through endogenous research. A sufficiently negative equilibrium elasticity of the individual supply of hours worked to an expansion in the set of consumption-good varieties destabilizes the steady state so that equilibrium trajectories may fluctuate between two growth regimes, one with and the other without an active research sector. Fluctuations affect intergenerational welfare, the evolution of GDP, and the functional income distribution. A stabilization policy can shift the economy onto its steady-state path. Fluctuations arise for empirically reasonable parameter constellations. The economics of fluctuations between growth regimes is linked to the intergenerational trade of shares and their pricing in the asset market. [less ▲]

The supply of hours worked and fluctuations between growth regimes

in Journal of Economic Theory (2021)

Declining hours of work per worker in conjunction with a growing work force may give rise to fluctuations between growth regimes. This is shown in an overlapping generations model with two-period lived ... [more ▼]

Declining hours of work per worker in conjunction with a growing work force may give rise to fluctuations between growth regimes. This is shown in an overlapping generations model with two-period lived individuals endowed with Boppart-Krusell preferences (Boppart and Krusell (2020)). On the supply side, economic growth is due to the expansion of consumption-good varieties through endogenous research. A sufficiently negative equilibrium elasticity of the individual supply of hours worked to an expansion in the set of consumption-good varieties destabilizes the steady state so that equilibrium trajectories may fluctuate between two growth regimes, one with and the other without an active research sector. Fluctuations affect intergenerational welfare, the evolution of GDP, and the functional income distribution. A stabilization policy can shift the economy onto its steady-state path. Fluctuations arise for empirically reasonable parameter constellations. The economics of fluctuations between growth regimes is linked to the intergenerational trade of shares and their pricing in the asset market. [less ▲]

Zur Zukunft der Telearbeit ("On the Future of Teleworking")

Article for general public (2020)

The World Economic History in 4 Figures, 1 Photo, and 1 Table

Conference given outside the academic context (2020)

Endogenous Factor Income Distribution: Piketty meets Romer

in Economic Inquiry (2020), 58

What is the relationship between the economy’s long-run growth rate, its capital-income ratio, and its factor income distribution? We argue that a satisfactory answer must be derived in an analytical ... [more ▼]

What is the relationship between the economy’s long-run growth rate, its capital-income ratio, and its factor income distribution? We argue that a satisfactory answer must be derived in an analytical framework that treats the growth and the savings rate as endogenous. From this perspective we scrutinize Piketty’s (2014) theory put forth in his book Capital in the Twenty-First Century in a richly parameterized variant of Romer’s (1990) seminal model with and without population growth. The economy’s growth and its savings rate are exogenous in Piketty’s theory and endogenous in Romer’s. We find that a smaller long-run growth rate may be associated with a smaller capital-income ratio. Hence, the key implication of Piketty’s Second Fundamental Law of Capitalism does not hold. Moreover, in contrast to Piketty’s theory, a smaller long-run growth rate may go together with a greater or a smaller capital share. [less ▲]

Tasks, Technology, and Factor Prices in the Neoclassical Production Sector

E-print/Working paper (2020)

This paper introduces tasks into the neoclassical production sector. Competitive firms choose the profit-maximizing amounts of factor-specific tasks that determine their factor demands and output supplies ... [more ▼]

This paper introduces tasks into the neoclassical production sector. Competitive firms choose the profit-maximizing amounts of factor-specific tasks that determine their factor demands and output supplies. We show that the effect of factor-augmenting technical change on relative and absolute factor prices can be decomposed into a productivity effect and a task-demand effect of opposite sign. These effects appear since the novel task-based approach distinguishes between the demands for tasks and the demands for factors. This perspective provides a new intuition for the emergence of relative and absolute factor biases and the role of the elasticity of substitution. [less ▲]