Demographic Change and Directed Technological Change

Author Name KOBAYASHI Keiichiro  (Senior Fellow, RIETI)
Creation Date/NO. September 2012 12-E-053
Research Project Research on Macroeconomic Policies Focused on Fiscal Reconstruction and Similar Measures
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In this paper, we analyze the implications of demographic change, i.e., the aging of society, on the direction of technological change and the rate of economic growth.

Taking demographic change as an exogenous event, the simple variant of Acemoglu's theory of directed technical change implies that (1) the elderly-care related technology must be a promising area of innovation and (2) the optimal growth rate must be lower in aging societies than in young ones, suggesting that the slowdown of economic growth may be an optimal response of the economy to population aging. The analytical framework is simple and robust such that this model can be used to assess various policy options concerning the demographic change in Japan and other countries.