Population, Pensions, and Endogenous Economic Growth

We study the eect of a declining labor force on the incentives to engage in labor-savingtechnical change and ask how this eect is inuenced by institutional characteristics of the pensionscheme. When labor is scarcer it becomes more expensive and innovation investments that increaselabor productivity are more protable. We incorporate this channel in a new dynamic generalequilibrium model with endogenous economic growth and heterogeneous overlapping generations.We calibrate the model for the US economy. First, we establish that the net eect of a declinein population growth on the growth rate of per-capita magnitudes is positive and quantitativelysignicant. Second, we nd that the pension system matters both for the growth performanceand for individual welfare. Third, we show that the assessment of pension reform proposals may bedierent in an endogenous growth framework as opposed to the standard framework with exogenousgrowth.[...]