Endogenous growth in a life-cycle model: The role of population growth and taxation
Patricio Arrau
Journal of Policy Modeling 14(2): 167-186
1992
ISSN/ISBN: 0161-8938 DOI: 10.1016/0161-8938(92)90007-yDocument Number: 368795
In this article we integrate the role of human capital as an engine of growth and as a determinant of life-cycle profiles of earnings and labor supply. We extend the Auerbach-Kotlikoff simulation model in order to introduce training decisions and endogenous growth. The impact of demographics and taxation on the endogenous rate of growth is studied. Unlike infinite horizon models of growth, income growth per capita and population growth are inversely related, and unlike fertility-based models, the direction of causality goes from the exogenous population growth to the endogenous economic growth. Taxation policy that favors human capital as opposed to physical capital translates into higher income growth per capita.