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Age structure and capital dilution effects in neo-classical growth models

Abstract

This paper reexamines the problem of the relationship between demographic growth and per capita income in neo-classical growth models with age-structured populations. It is suggested that, when they assume a constant rate of capital depreciation, such models overestimate the negative impact of population growth through capital dilution effects. With more realistic depreciation schedules, the ageing of the capital stock which results from lower growth implies a higher overall depreciation rate, which reduces benefits from lower capital dilution. The implications of this observation are examined for the existence of an optimum population growth rate, for models with heterogeneous capital, and for models where capital obsolescence is not fixed but is allowed to vary.

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This article is a modified version of a paper presented at the First Annual Meeting of the European Society for Population Economics, Rotterdam, September 1987. I am indebted to the anonymous referees for helpful comments and suggestions and to Linda Sergent for revising the English text.

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Blanchet, D. Age structure and capital dilution effects in neo-classical growth models. J Popul Econ 1, 183–194 (1989). https://doi.org/10.1007/BF00161477

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Keywords

  • Population Growth
  • Capita Income
  • Capital Stock
  • Lower Growth
  • Population Growth Rate