Age structure,education, and the transmission of technical change

The significance of deviations from exponential population growth to economic development requires the construction of growth models that explicitly recognize demographic forces as a potential source of nonstationarities. This paper uses an overlapping generations approach to analyze the impact of population aging on technological innovations in the production process. Specifically, it is assumed that a newly invented technology can be used only if the production unit engages human labor that has been trained for this task (labor-embodied technical change). In a model of overlapping generations 1-sector optimal growth, there are 3 basic components: population, education and labor, and production and investment. An individual who has been in school continuously from the time of birth embodies, according to this model, the most up-to-date form of human capital. When the population growth rate is high, technological innovations are achieved largely through the constant influx of recently educated young people into the labor force. However, when population declines lead to a slowing down of this influx, increased adult education is necessary to stimulate the continued introduction of innovations into the productive process. The form of the optimality conditions, the comparative statistics properties, and the form of the nonstationary optimal economic growth path in this model are similar to those in the Van Imhoff model of homogeneous human capital.