Conesa, Juan Carlos
[Author]
;
Kehoe, Timothy J.
[Other];
Nygaard, Vegard M.
[Other];
Raveendranathan, Gajendran
[Other]National Bureau of Economic Research
Implications of Increasing College Attainment for Aging in General Equilibrium
Published:
Cambridge, Mass: National Bureau of Economic Research, 2019
Published in:NBER working paper series ; no. w26000
Extent:
1 Online-Ressource; illustrations (black and white)
Language:
English
DOI:
10.3386/w26000
Identifier:
Reproduction note:
Hardcopy version available to institutional subscribers
Origination:
Footnote:
System requirements: Adobe [Acrobat] Reader required for PDF files
Mode of access: World Wide Web
Description:
We develop an overlapping generations general equilibrium model of the U.S. economy with heterogeneous consumers who face idiosyncratic earnings and health risk to study the implications of increasing college attainment, decreasing fertility, and increasing longevity (2005-2100). While all three trends contribute to a higher old age dependency ratio, increasing college attainment has different implications because it increases labor productivity. Decreasing fertility and increasing longevity require the government to increase the average labor tax rate from 33.5 to 47.1 percent. Increasing college attainment lowers the required tax increase by 12.0 percentage points. The labor tax rate required to balance the government budget is higher under general equilibrium than in a small open economy with a constant interest rate, because the reduction in the interest rate lowers capital income tax revenues