Wealth creation, wealth dilution and demography

Journal Article (Journal Article)

Demographic forces are crucial drivers of macroeconomic performance. Yet, existing theories do not allow demography to respond to fundamentals and policies while determining key macroeconomic variables. We build a model of endogenous interactions between fertility and innovation-led productivity growth that delivers empirically consistent co-movements of population, income and wealth. Wealth dilution and wage dynamics stabilize population through non-Malthusian forces; demography determines the ratios of labor income and consumption to financial wealth. Shocks that reduce population size, like immigration barriers, reduce permanently the labor share and the mass of firms, creating prolonged stagnation and substantial intergenerational redistribution of income and welfare.

Full Text

Duke Authors

Cited Authors

  • Brunnschweiler, CN; Peretto, PF; Valente, S

Published Date

  • January 1, 2021

Published In

Volume / Issue

  • 117 /

Start / End Page

  • 441 - 459

International Standard Serial Number (ISSN)

  • 0304-3932

Digital Object Identifier (DOI)

  • 10.1016/j.jmoneco.2020.02.002

Citation Source

  • Scopus