Hostname: page-component-586b7cd67f-t7czq Total loading time: 0 Render date: 2024-11-24T19:31:20.676Z Has data issue: false hasContentIssue false
  • English
  • Français

OPTIMAL EDUCATION IN AN AGE-STRUCTURED MODEL UNDER CHANGING LABOR DEMAND AND SUPPLY

Published online by Cambridge University Press:  14 April 2011

Alexia Prskawetz ,
Tsvetomir Tsachev  and
Vladimir M. Veliov
Alexia Prskawetz
Affiliation:
Vienna University of Technology and Vienna Institute of Demography, Austrian Academy of Sciences
Tsvetomir Tsachev*
Affiliation:
Institute of Mathematics and Informatics, Bulgarian Academy of Sciences
Vladimir M. Veliov
Affiliation:
Vienna University of Technology
*
Address correspondence to: Tsvetomir Tsachev, Institute of Mathematics and Informatics, Bulgarian Academy of Sciences, Acad. G. Bonchev str., block 8, 1113 Sofia, Bulgaria; e-mail: [email protected].
Get access Rights & Permissions [Opens in a new window]

Abstract

We introduce a model of the optimal education policy at the macro level, allowing for heterogeneity of the workforce with respect to its age and qualification skills. Within this framework we study the optimal education rate in the context of changes in labor demand (as represented by the elasticity of substitution across ages and qualification) and labor supply (as represented by a change in the population growth rates). Applying an age-structured optimal-control model, we derive features of the optimal age-specific education rate. Our results show that the relation between the elasticities of substitution of labor across ages plays a crucial role in the way the demographic changes affect (both in the short and in the long run) the optimal educational policy. We also show that under imperfect substitutability across age and qualification groups, the optimal educational policy is adjusted in advance to any change in the labor supply.

Keywords

Human CapitalAge Composition of LaborAge-Structured ModelOptimal Control
Type
Articles
Information
Macroeconomic Dynamics , Volume 16 , Issue 2 , April 2012 , pp. 159 - 183
Copyright
Copyright © Cambridge University Press 2011

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

REFERENCES

Barucci, E. and Gozzi, F. (2001) Technology adoption and accumulation in a vintage-capital model. Journal of Economics 74, 1–38.CrossRefGoogle Scholar
Boucekkine, R., de la Croix, D., and Licandro, O. (2002) Vintage human capital, demographic trends, and endogenous growth. Journal of Economic Theory 104, 340–375.CrossRefGoogle Scholar
Boucekkine, R. and Ruiz-Tamarit, R. (2008) Special functions for the study of economic dynamics: The case of the Lucas–Uzawa model. Journal of Mathematical Economics, 44, 133–54.CrossRefGoogle Scholar
Card, D. and Lemieux, T. (2001) Can falling supply explain the rising return to college for younger men? A cohort-based analysis. Quarterly Journal of Economics 116, 705–746.CrossRefGoogle Scholar
Chari, V. V. and Hopenhayn, H. (1991) Vintage human capital, growth, and the diffusion of new technology. Journal of Political Economy 99, 1142–1165.CrossRefGoogle Scholar
Christiaans, T. (2003) Aging in a Neoclassical Theory of Labor Demand. Discussion paper 112–03, University of Siegen.Google Scholar
Connelly, R. and Gottschalk, P. (1995) The effect of cohort composition on human capital accumulation across generations. Journal of Labor Economics 13, 155–176.CrossRefGoogle Scholar
Feichtinger, G., Hartl, R. F., Kort, P. M., and Veliov, V. M. (2005) Environmental policy, the Porter Hypothesis and the composition of capital. Journal of Environmental Economics and Management 50, 434–446.CrossRefGoogle Scholar
Feichtinger, G., Hartl, R. F., Kort, P. M., and Veliov, V. M. (2006) Anticipation effects of technological progress on capital accumulation: A vintage capital approach. Journal of Economic Theory 126, 143–164.CrossRefGoogle Scholar
Feichtinger, G., Tragler, G., and Veliov, V. M. (2003) Optimality conditions for age-structured control systems. Journal of Mathematical Analysis and Applications 288, 47–68.CrossRefGoogle Scholar
Feichtinger, G., Tsachev, Ts., and Veliov, V. M. (2004) Maximum principle for age and duration structured systems: A tool for optimal prevention and treatment of HIV. Mathematical Population Studies 11, 3–28.CrossRefGoogle Scholar
Freeman, R. B. (1979) The effect of demographic factors on age–earnings profiles. Journal of Human Resources 14, 289–318.CrossRefGoogle Scholar
Heijdra, Ben J. and Romp, Ward E. (2009) Human capital formation and macroeconomic performance in an ageing small open economy. Journal of Economic Dynamics and Control 33, 725–744.CrossRefGoogle Scholar
Katz, L. F. and Autor, D. H. (1999) Changes in the wage structure and earnings inequality. In Ashenfelter, O. and Card, David (eds.), Handbook of Labor Economics, vol. 3, pp. 1463–1555. Elsevier Science.Google Scholar
Katz, L. F. and Murphy, K. M. (1992) Changes in relative wages, 1963–1987: Supply and demand factors. Quarterly Journal of Economics 107, 35–78.CrossRefGoogle Scholar
Kremer, M. and Thomson, J. (1998) Why isn't convergence instantaneous? Young workers, old workers, and gradual adjustment. Journal of Economic Growth 3, 5–28.CrossRefGoogle Scholar
Lam, D. (1989) Population growth, age structure, and age-specific productivity. Does a uniform age distribution minimize lifetime wages? Journal of Population Economics 2, 189–210.CrossRefGoogle Scholar
Lucas, R. E. (1988) On the mechanics of economic development. Journal of Monetary Economics 22, 3–42.CrossRefGoogle Scholar
Murphy, K. M. and Welch, F. (1992) The structure of wages. Quarterly Journal of Economics 107, 285–326.CrossRefGoogle Scholar
Pfeiffer, F. and Reuß, K. (2007) Age-Dependent Skill Formation and Returns To Education: Simulation Based Evidence. IZA discussion paper 2882.Google Scholar
Prskawetz, A., Fent, T., and Guest, R. (2008) Workforce aging and labor productivity. The role of supply and demand for labor in the G7. In Prskawetz, Alexia, Bloom, David, and Lutz, Wolfgang (eds.), Population Aging, Human Capital Accumulation, and Productivity Growth, A Supplement to Population and Development Review, vol. 34, pp. 298–323. New York: Population Council.Google Scholar
Prskawetz, A. and Veliov, V. M. (2007) Age-specific dynamic labor demand and human capital investment. Journal of Economic Dynamics and Control 31, 3741–3777.CrossRefGoogle Scholar
Roger, M. and Wasmer, M. (2009) Heterogeneity Matters: Labour Productivity Differentiated by Age and Skills.Working paper 2009-51, Paris School of Economics.Google Scholar
Rojas, J. A. (2005) Life-cycle earnings, cohort size effects and social security: A quantitative exploration. Journal of Public Economics 89, 465–485.CrossRefGoogle Scholar
Stapleton, D. C. and Young, D. J. (1988) Educational attainment and cohort size. Journal of Labor Economics 6, 330–361.CrossRefGoogle ScholarPubMed
Veliov, V. M. (1997) On the time-discretization of control systems. SIAM Journal of Control and optimization 35 (5), 1470–1486.CrossRefGoogle Scholar
Webb, G. F. (1985) Theory of Nonlinear Age-Dependent Population Dynamics. New York: Marcel Dekker.Google Scholar
Weiss, Y. (1986) The determination of life cycle earnings: A survey. In Ashenfelter, O. and Layard, R. (eds.), Handbook of Labour Economics, vol. 1, pp. 603–640. Amsterdam: Elsevier.Google Scholar
Welch, F. (1979) Effects of cohort size on earnings: The baby boom babies' financial bust. Journal of Political Economy 87, 65–97.CrossRefGoogle Scholar