This paper investigates the relationship between growth and inequality from a demographic point of view. In an extended model of the accidental bequest with endogenous fertility, we analyze the effects of a decrease in the old-age mortality rate on the equilibrium growth rate as well as on the income distribution. We show that the relationship between growth and inequality is at first positive and then may be negative in the process of population aging. The results are consistent with the empirical evidence in some developed countries.JEL Classification: D31, J13, O41
It has been argued whether a transfer policy for elderly people should be in kind or in cash. This paper presents a rationale to answer the question in an endogenous growth model with a twoway intrafamily transfer in middle age, education for the child as an inter-vivos transfer, and informal parental care in exchange for a bequest. We have two analytical results. First, a transfer in cash, such as a public pension, prevents economic growth because a strategic behavior concerning caregiving generates a disincentive effect on education. Second, a transfer in kind, such as public formal care, promotes economic growth because the valuation of the service generates an additional benefit of education, which dominates the disincentive effect. Our results show that old age support should be in kind rather than in cash in the context of economic growth and also welfare if bequests are strategic. * I would like to thank an anonymous referee, Akira Yakita, Hikaru Ogawa, Tatsuya Omori, Sangho Kim, and Byung-In Lim for useful comments.
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