Population aging, economic growth, and the social transmission of human capital: An analysis with an overlapping generations model

We develop a computable overlapping generations model in which the accumulation of human capital is endogenous. The model is similar to that of Fougere et al. (2009) and Sadahiro and Shimasawa (2002). It is, however, distinguished from them in several aspects regarding the individual utility function and the intergenerational transmission of human capital. We use the model to explore the effect of population aging on economic growth in Korea. The simulation shows that population aging causes a decrease in labor supply growth and an increase in capital stock growth, thus yielding capital deepening. The aging of the population may significantly undermine growth potential. However, the result is sensitive to the manner of intergenerational transmission of human capital. Our study shows that the mode of social transmission of human capital is quite important for long-term growth of the economy.