Research

Publication

1. The Aging Tax on Potential Growth in Asia (2022). Journal of Asian Economics, Vol. 81, p.101495. doi.org/10.1016/j.asieco.2022.101495

Abstract: Population aging is becoming a prominent issue in Asia, especially for developing countries where demographic changes have asserted a downward pressure on the rate of growth. This paper refers to such potential unwanted effects as an “aging tax” and analytically examines them from a neoclassical perspective, using a Diamond-type overlapping generations model with endogenous retirement, survival rate, and old-age productivity. Based on this setup, negative impacts exist if too many old workers that are sufficiently unproductive choose to defer retirement under the aging pressure, which drains resources from future generations. Numerical simulations show that an aging tax can reduce the potential per capita growth rate (technology-adjusted) by up to 0.12 percentage points annually for some countries in Asia. Our results highlight that countries with sufficiently large labor shares (due to a high ratio of self-employment or a manual labor-centric production) and inadequate educational attainment are potentially the most sensitive and vulnerable to population aging.

View Working Paper version.

Working Papers

1. Fertility, Innovation, and Skill Premium in An Endogenous Growth Model with Technological Spillover

Abstract: Recent years have witnessed a sharp rise in robot stock and industrial patents, in contrast to the reduction in fertility in many countries. To properly investigate these developments in the long run, we build a two-sector Diamond-type Overlapping Generations Model (OLG) with endogenous R\&D growth, fertility, and education. The innovation in our paper is the inclusion of education quality and spillover effects from the high-skilled to the low-skilled sector. The model predicts that reduced fertility is inevitable because parents must race with machines regarding education expenses; skill premiums will likely rise, while the ratio of the truly high-skilled population may decline. We further perform the simulations for the Japanese economy since the boom of industrial robots (1975) and see that the model dynamics are consistent with actual data. Furthermore, depending on the strength of the spillovers, different states of equilibrium are realized, with high or low growth and high or low skill premium economies. As a result, the model provides several insights into understanding and predicting the complex dynamics of demographics, labor skills, and technological progress in the future.

2. Sandwich Caregivers, Employment, and Elderly Care in a Fertility Declining Society

Activities