Secular Stagnation? Growth, Asset Returns and Welfare in the Next Decades

Konferenzbeitrag

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 in which we explicitly model risky and risk-free asset returns. This enables us to predict how the natural interest rate is affected by the demography induced secular stagnation. 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 severe welfare losses for asset rich households. 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: Beiträge zur Jahrestagung des Vereins für Socialpolitik 2016: Demographischer Wandel - Session: Demographic Change and the Macroeconomy I ; No. B12-V2

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

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Ludwig, Alexander ; Geppert, Christian ; Abiry, Raphael
• Event: Veröffentlichung
• (who): ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften, Leibniz-Informationszentrum Wirtschaft
• (where): Kiel und Hamburg
• (when): 2016

Further information

• Handle: http://hdl.handle.net/10419/145764
• Last update: 10.03.2025, 11:43 AM CET