Aging and automation in economies with search frictions

Abstract

This paper investigates the impact of an increase in life expectancy on the level and the distribution of income in the presence of skill heterogeneity and automation capital. It shows analytically that an increase in life expectancy induces the replacement of low-skilled workers by automation capital and high-skilled workers.It also raises the skill premium, but has an ambiguous e¤ect on total income. When we perform a simulation exercise, based on US data, we …nd that an increase in life expectancy raises the level of income but exacerbates its distribution. For this reason, we also examine redistributive policies that can mitigate some of the negative e¤ects that follow an increase in life expectancy.

Automation, Education, and Population: Dynamic Effects in an OLG Growth and Fertility Model

“…Zhang et al (2022), we show that an increase in life expectancy raises the skill premium; however, we also show that a decrease in the birth rates can slow down wage inequality. These results contribute to the literature relating demographic changes and inequality (e.g., He, 2012;Chen et al, 2018;Cho & Díaz, 2019;X. Zhang et al, 2022).…”

“…This result is supported by X. Zhang et al (2022) as they find that an increase in life expectancy raises the skill premium. Contrarily, Cho & Díaz (2019) find that relative skilled labor supply increases due to demographic changes leading to a decline in the skill premium.…”

“…Acemoglu & Restrepo (2017, 2022a; Basso & Jimeno (2021); X. Zhang et al (2022); yet, their results refer to the long-run impact of ageing. In turn, in our model, the long-run effect on the dynamics of the stock of robots differs depending on whether population ageing is induced by a lower total birth rate or a longer expected lifespan.…”

“…From these contributions, a few relate closely to ours: Irmen (2021), Acemoglu & Restrepo (2022a), Basso & Jimeno (2021), X. Zhang et al (2022) and Stähler (2021). All these papers explore automation and population aging; however, they do not include endogenous fertility nor heterogeneous birth rates across skill groups.…”

“…In an attempt to explain the positive cor-relation between GDP growth and population ageing, Acemoglu & Restrepo (2017, 2022a show that countries experiencing a significant aged population tend to adopt more automation in their production process, resulting in a productivity boost which counteracts the effect of an aged labor force. Following their contribution, a new wave of research has arisen in the literature regarding this issue (Abeliansky & Prettner, 2017;Abeliansky et al, 2020;Acemoglu & Restrepo, 2017, 2022aIrmen, 2021;Leitner & Stehrer, 2019;Basso & Jimeno, 2021;X. Zhang et al, 2022;Stähler, 2021).…”