Secular stagnation? Growth, asset returns and welfare in the next decades: First results

Arbeitspapier

Ongoing demographic change will lead to a relative scarcity of raw labor to the effect that output growth will be decreasing in the next decades, a secular stagnation. As physical capital will be relatively abundant, this decrease of output will be accompanied by reductions of asset returns. We quantify these effects for the US economy by developing an overlapping generations model with risky and risk-free assets. Without adjustments of human capital, risky returns decrease until 2035 by about 0.7 percentage point, and the risk-free rate by about one percentage point, leading to substantial welfare losses for asset rich households. Per capita output is reduced by 6%. Endogenous human capital adjustments strongly mitigate these effects. We conclude that human capital policies will be crucial in the context of labor shortages.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: SAFE Working Paper ; No. 145

Classification and Topics

• Classification: Wirtschaft ; General Aggregative Models: Forecasting and Simulation: Models and Applications ; Computable General Equilibrium Models ; Asset Pricing; Trading Volume; Bond Interest Rates
• Subject: secular stagnation ; demographic change ; overlapping generations ; natural rate ; equity premium ; growth ; welfare ; human capital

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Geppert, Christian ; Ludwig, Alexander ; Abiry, Raphael
• Event: Veröffentlichung
• (who): Goethe University Frankfurt, SAFE - Sustainable Architecture for Finance in Europe
• (where): Frankfurt a. M.
• (when): 2016

Further information

• DOI: doi:10.2139/ssrn.2841555
• Handle: http://hdl.handle.net/10419/146690
• URN: urn:nbn:de:hebis:30:3-416971
• Last update: 10.03.2025, 11:41 AM CET