Demography, Growth and Inequality

Jochen O. Mierau, University of Groningen
Stephen Turnovsky, University of Washington

We extend the single-sector endogenous growth model to allow for a general demographic structure. The model shows that due to the “generational turnover term,” the equilibrium growth rate is less than that of a representative agent model. We find the local dynamics about the balanced growth path (bgp) to be unstable, implying that the bgp is the only viable equilibrium. Using numerical simulations, we show that the economic consequences of a change in the population growth rate differ substantially, depending on the source of the demographic change. Finally, we analyze the relationship between changes in the demographic structure and what we call the “natural rate of wealth inequality”.