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

Abstract

We address two main structural changes occurring in developed countries: the rise of automation and population ageing. We use an R&D-based growth model in an OLG framework with endogenous education and fertility, and automation in the production process. Our model is able to combine the growth of real wages over time and either a fall or an increase in birth rates, consistent with recent data regarding the birth rate by skill group. Moreover, our model allows for the study of the interplay between the effects of population ageing and those of automation. The results show a dynamics consistent with the US trends for the period covering 1970 to 2019. We also show the model's response to automation and demographic (fertility vs longevity) exogenous shocks and to policy instruments aiming to mitigate inequality. JEL Codes: J11, J23, J24, O3, O4