human capital inequality life expectancy and economic growth this article presents a model in which inequality affects per capita income when individuals decide to invest in education taking into account their life expectancy which depends to a large extent on the human capital of their parents our results show the existence of multiple steady states depending on the initial distribution of education the low steady state is a poverty trap in which children raised in poor families have low life expectancy and work as non educated workers the empirical evidence suggests that the life expectancy mechanism explains a major part of the relationship between inequality and human capital accumulation increases in life expectancy and human capital accumulation have accelerated since the post world war ii period in most parts of the world however in spite of the convergence in life expectancy across countries during this period see for example becker et al 2005 in 2000 there was still an immense gap between the rich and the poor world life expectancy was 78 years in oecd countries but only 47 years in sub saharan africa where the gap with rich countries is increasing nowadays due to aids being widespread likewise the striking disparities in human capital are also evident whereas the secondary school enrolment rate was almost 100 in rich countries more than 70 of children in sub saharan africa were not enrolled in secondary schooling and therefore entered the labour market as unskilled workers from childhood these disparities in schooling are also accompanied by huge differences in the distribution of education thus the human capital gini coefficient in sub saharan africa 0 56 is twice as high as that of oecd countries 0 21 in this article we argue that high human capital inequality low life expectancy and low human capital accumulation rates reinforce each other and may explain the persistence of poverty in a great part of the world

radicalism versus gradualism an analytical survey of the transition strategy debate academic debate on a transition strategy for former socialist economies continues even a quarter century after the collapse of the communism in central and eastern europe and the former soviet union in this paper through an analytical survey of 137 preceding studies we present an overall picture of the debate and examine the relationship between the debate attitudes and the literature attributes in related studies we found that the radicalists maintain a consistent debate attitude from the viewpoints of time speed and policy sequence of economic transition while the debate attitude of the gradualists is more diversified we also found that there is another group of researchers that stays within the framework of the radicalism versus gradualism debate while at the same time keeping at arm s length from both the radicalists and the gradualists in addition our regression estimation of qualitative selection models provides interesting findings on the relationship between the debate attitudes and the literature attributes

the effect of life expectancy on fertility saving schooling and economic growth theory and evidence we construct a simple growth model where agents with uncertain survival choose schooling time life cycle consumption and the number of children we show that rising longevity reduces fertility but raises saving schooling time and the growth rate at a diminishing rate cross section analyses using data from 76 countries support these propositions life expectancy has a significant positive effect on the saving rate secondary school enrollment and growth but a significant negative effect on fertility through sensitivity analyses the effect on the saving rate is inconclusive while the effects on the other variables are robust and consistent these estimated effects are decreasing in life expectancy

intergenerational transfers and demographic transition abstract this paper presents an analysis of demographic transition based on the endogenous evolution of intergenerational transfers along an economy s endogenous path of development two period lived agents belonging to overlapping generations choose optimally their desired levels of consumption and fertility together with their desired sizes of transfers to both parents and children parents are more efficient than children in producing output but some parental time must be devoted to child rearing at low levels of development fertility is high and the flow of net intergenerational transfers is from the young to the old at high levels of development fertility is low and the flow of net transfers is from the old to the young these results accord strongly with empirical observations and the analysis may be seen as formalising for the first time a long standing and well respected hypothesis in the demographic transition literature

macroeconomic issues of soviet reform the title of this paper is not yet anachronistic for the soviet heritage of domestic and interrepublican economic arrangements sets the initial constraints for economic reform in the republics of the former soviet union a standard approach to economic reform in socialist economies has developed over the last two years on the basis of both experience especially in poland and analysis see e g joint study of the soviet economy 1990 david lipton and jeffrey sachs 1990 fischer and alan gelb 1991 we start by reviewing this new orthodox prescription and then examine the developing russian reform program in its light we turn next to the special aspects of reform in the former soviet republics interrepublican economic relations and reform coordination and conclude with a brief discussion of the role of the west

transition economies performance and challenges i present data and assess the first twelve years of the transition from plan to market transformations have taken place but the income gap between the transition and advanced economies has widened transition countries further east have performed worse than those further west but policies matter all countries carried out quickly type i reforms such as macroeconomic stabilization price liberalization small scale privatization and breakup of state owned enterprises they differed in type ii reforms such as large scale privatization and development of banking and legal systems countries that developed a functioning legal framework and corporate governance have performed better than others

health education and life cycle savings in the development process this paper studies investment in health and human capital in a life cycle model health investment enhances survival to old age by improving health from its endowed level the model predicts two distinctive phases of development when income is low enough the economy has no health investment and little savings leading to slow growth when income grows health investment will become positive and the saving rate will rise leading to higher life expectancy and faster growth a health subsidy can move the economy from the first phase to the next subsidies on health and human capital investments can improve welfare

demographic structure and growth the effect of unfunded social security abstract this paper examines how demographics affect economic growth in an olg model with unfunded social security we derive two interesting results first the relationship between population growth and per capita output growth is hump shaped second the relationship between life expectancy and per capita output growth is also hump shaped

a model with self fulfilling prophecies of longevity abstract in a model where longevity increases with average human capital self fulfilling prophecies of ageing can occur if agents expect a low life expectancy they invest less in education thus generating low human capital and longevity as a result policies that affect longevity expectations may be welfare improving

optimal retirement with increasing longevity we develop an optimizing life cycle model of retirement with perfect capital markets we show that longer healthy life expectancy usually leads to later retirement but with an elasticity less than unity we calibrate our model using data from the us and find that over the last century the effect of rising incomes which promote early retirement has dominated the effect of rising lifespans our model predicts continuing declines in the optimal retirement age despite rising life expectancy provided the rate of real wage growth remains as high as in the last century

does demographic change matter for growth abstract how important is the demographic transition for economic growth to answer this question this paper constructs a general equilibrium overlapping generations model with endogenous fertility the model is calibrated to data from taiwan a country that experienced rapid economic growth while undergoing significant demographic transition our results suggest that more than one third of the output growth in taiwan during the past four decades can be attributed to demographic transition while tfp growth explains another third and the remainder is mainly due to skill biased technological progress our results show that demographic change is an important driver of the growth process in countries undergoing rapid fertility decline

a political economy approach to the neoclassical gradualist model of transition a political economy approach to the neoclassical gradualist model of transition requires the exposition of what i define the primary elements of the model which are economic analysis definition of a good society speed political structure ideological structure and whether the initial conditions were incorporated in the model after the identification of the primary elements of the neoclassical gradualist model the next step is to identify secondary elements the desired changes with respect to price liberalization stabilization privatization institutional structure monetary policy and the financial system fiscal policy international trade and foreign aid and social policy the analytical framework developed makes possible to understand the neoclassical gradualist model from a new and more enlightening perspective we are better able to comprehend the complexities involved and the disagreements about the reform process the adoption of a gradual process of transition did not only involve specifying the required policies of a successful transition but also entailed a process a sequence by which the reforms should be introduced as such a process of transition consistent with the policies recommended by the neoclassical gradualists economists is developed the conclusion reveals the inconsistencies in the model copyright blackwell publishers ltd 2005

the transition according to cambridge mass this paper reviews the nber s the transition in eastern europe this book s 18 essays examine privatization stabilization fiscal policies the nascent private sector bankruptcy foreign trade and investment etc individual country performance occupies six studies these essays which are of high quality provide a cross section of the literature on transition however the book s stronger conclusions are not supported by strong evidence two conclusions unemphasized by contributors emerge expectations which reflect the theories used to design standard reforms are often unfulfilled during reforms a plausible explanation for the misplaced expectations is the ahistorical approach of those theories

new institutional economics in the post socialist transformation debate the paper suggests that there is a tension between the basic tenant of new institutional economics nie and the manner in which it has been applied in the debate on post socialist transformation this tension is explored in the context of four main perspectives on nie i property rights ii transaction costs economics iii new economic history and iv evolutionary economics there are two main arguments the first is that the transformation phase should be seen as open ended rather than a closed process where the pure market is the inevitable end result the second is that although the nie literature touches on most of the issues which are relevant to post socialist transformation the insights that it offers are still too general for policy guidance

the remonetization of the commonwealth of independent states in 1940 britain saved herself from tyranny by her endeavors in the long run she saved the world from tyranny by her example in that fateful year a splendid few rose up into the skies over britain to do battle against the forces of despotism and evil an analogously small number took up the pen rather than the sword preeminent among these was friedrich august von hayek the fourth generation of austrian economists worked mostly abroad it was england s good fortune to be the safe haven of hayek from 1932 to 1950 where he was tooke professor of economic science and statistics at the london school of economics with the inevitable delays imposed by the uncertainties of war the road to serfdom was eventually published in england in the spring of 1944 deservedly it became an instant success and hayek found out immediately what a tiny minority he was in one is reminded of the english bowman before the battle of agincourt who laments to king henry that the odds appear to be five to one against the english to which henry replies if fewer men the greater share of honor it is a wonderful thing that hayek has lived to see the good that he espoused triumph over the evil that he despised and the forces of tyranny put to flight on a global scale no one could be more deserving of the share of honors that have been bestowed upon him

economic growth population theory and physiology the bearing of long term processes on the this lecture sketches a theory of the secular decline in morbidity and mortality that takes account of changes induced in physiological functioning since 1700 the synergism between technological and physiological improvements has produced a form of human evolution biological though not genetic rapid culturally transmitted and not necessarily stable which is still ongoing in both oecd and developing countries thermodynamic and physiological aspects of economic growth are defined and their impact on growth rates is assessed implications of this theory for population forecasting measurement of national income demand for leisure pension policies and demand for health care are considered excerpt

financial control in the transition from classical socialism to a market economy the transition from socialism to capitalism poses severe problems of financial management that have yet to be resolved in principle let alone in practice one unfortunate consequence is continual financial turmoil as socialist economies of the soviet union and eastern europe attempt reform inflation either open or repressed first accompanies and then undermines attempts to decentralize decision making to dampen inflation and prevent economic chaos even reform governments may be provoked to reintervene by seizing the financial assets of enterprises reinstituting price controls or commandeering outputs through state orders and similar devices but why should the transition from central planning to a market economy be inflationary understanding the system of financial control in the preexisting regime of classical socialism is the key to understanding what might go wrong in the transition under classical socialism all the means of production industrial and agricultural are state owned output targets input levels wages and prices are all set by a stalinist system of central planning accordingly i shall first identify 1 how domestic fiscal and monetary processes interact with and complement central planning in the classical socialist economy and then discuss 2 why this mechanism for securing domestic financial control and avoiding inflation under classical socialism tends to break down when decentralization begins and central planning is weakened the discussion will then turn to 3 how in a more deliberate transition domestic tax and monetary arrangements might be managed to keep the average price level stable as the market prices of individual goods and services become free to fluctuate after sufficient domestic financial control is secured

longevity and economic growth in a dynastic family model with an annuity market abstract this paper investigates the growth implication of rising longevity in a dynastic family model with an annuity market we show that rising longevity raises life cycle savings human capital investment labor supply and the growth rate of per capita income

recombinant property in east european capitalism recombinant property is a form of organizational hedging in which actors respond to uncertainty by deversifying assets redefining and recombining resources it is an attempt to hold resources that can be justified by more than one legitimating principle property tansformation in postsocialist hungary involves the decentralized reorganization of assets and the centralized management of liabilities together they blur the boundaries of public and private the boundaries of enterprises and the boundedness of justificatory principles enterprise level field research data on the ownership structure of hungary s 220 largest enterprises and banks and an examination of the government s recent debt consolidation programs suggest the emergence of a distinctively east european capitalism that will differ as much from west european capitalism as do contemporary east asian variants

the process of socialist economic transformation in this paper we consider the reform process in those central and east european countries that have made the decision to move from a more or a less planned socialist system to a private market economy one in which private ownership predominates and most resources are allocated through markets because the reform process is both complex and intertwined with political factors especially the shift towards representative democracy and because there are substantial differences among the reforming countries no single detailed road map can guide the way to the new systems rather the paper sets out general considerations that provide a framework for reform and relates the choices to some initial conditions of the various reforming countries the framework applies also to the soviet union or in the event of its disintegration to its successor states as they move to market systems

the virtues of gradualism and legitimacy in the transition to a market economy this paper presents a simplified model of sectoral restructuring in eastern europe a move towards allocative efficiency is desired by the reform minded government but the shift to higher productivity which such efficiency requires would lead to massive layoffs and labour reallocation in the transition period we look at the impact of political constraints unanimity and or majority worker approval on reform proposals when the government faces a heterogeneous workforce holding private information on relative outside opportunities when the budgetary consequences of exit compensations are so important as to make partial reforms preferable to full reforms gradualism emerges as the optimum in a dynamic context without government commitment it is also shown that under democratic majority rule a government in control of the agenda of reforms can win majority approval for plans which end up hurting majority interests intertemporally by threatening to switch majorities in future reform proposals this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item

credit markets credibility and economic transformation this paper focuses on the special role that capital markets play in the transformation of centrally planned economies into well functioning market economies we demonstrate that underdeveloped credit markets inhibit the effectiveness of price reform monetary and credit policies and trade liberalization we explore various ways to overcome the difficulties associated with the underdeveloped credit markets in this regard we examine the implications of cleaning the balance sheets of enterprises and banks from nonperforming loans as well as ways to enhance credibility the paper concludes with a brief discussion of sequencing of economic reform measures

limited life expectancy human capital and health investments human capital theory predicts that life expectancy will impact human capital attainment we estimate this relationship using variation in life expectancy driven by huntington disease an inherited neurological disorder we compare investments for individuals who have ex ante identical risks of hd but differ in disease realization individuals with the hd mutation complete less education and job training the elasticity of demand for college attendance with respect to life expectancy is around 1 0 we relate this to cross country and over time differences in education we use smoking and cancer screening data to test the corollary that health capital responds to life expectancy

microeconomic issues in the transition to a market economy evidence from developing countries suggests that a one sided preoccupation with macroeconomic issues may be unfortunate as macro stabilization programs tend to unravel in the presence of an inadequate micro adjustment for example kiguel and liviatan 1990 this finding is important because the socialist system introduced microeconomic distortions that probably transcend those observed in the third world the recent developments in poland yugoslavia and the soviet union also support the hypothesis that macro stabilization will be difficult to achieve in the transforming socialist economies in the absence of adequate micro adjustments in this paper i address what i consider to be the most important micro issues related to the transition from socialist to market economies i first summarize the initial microeconomic conditions and then describe the main changes that have taken place in the early stages of the transition finally i discuss the micro policy agenda that needs to be addressed if the transition is to be successful

early mortality declines at the dawn of modern growth we explore the hypothesis that demographic changes which began in the seventeenth and eighteenth centuries are at the root of the acceleration in growth rates at the dawn of the modern age during this period life tables for geneva and venice show a decline in adult mortality french marriage registers reveal an important increase in literacy historians measure an acceleration of economic growth we develop an endogenous growth model with a realistic survival law in which rising longevity increases individual incentives to invest in education and fosters growth we quantitatively estimate that the observed improvements in adult mortality account for 70 of the growth acceleration in the pre industrial age

competition and privatization amidst weak institutions evidence from mongolia mongolia s mass privatization program was implanted in a country that lacked the very basic institutions of capitalism this paper examines the effects of competition and ownership on the efficiency of the newly privatized enterprises using a representative sample of enterprises and controlling for possible selection biases competition has quantitatively large effects perfectly competitive firms having nearly double the efficiency of monopolies enterprises with residual state ownership appear to be more efficient than other enterprises reflecting an environment where the government was pressured to focus on efficiency and institutions gave little voice to outsider owners jel p0 l1 l33 o12

capital and labor saving technical change in an aging economy does population aging and the associated increase in the old age dependency ratio affect economic growth the answer is given in a novel analytical framework that allows for population aging to affect endogenous capital and labor saving technical change the short run analysis reveals that population aging induces more labor and less capital saving technical change as it increases the relative scarcity of labor with respect to capital due to external contemporaneous knowledge spill overs across innovating firms induced technical change has a first order effect on current aggregate income in the long run capitalsaving technical progress vanishes and the economy s growth rate reflects only labor saving technical change however the mere possibility of capital saving technical change is shown to imply that the economy s steady state growth rate becomes independent of its age structure neither a higher life expectancy nor a decline in fertility affects economic growth in the long run

the lessons of limited market oriented reform the waves of reform and restructuring now engulfing most of eastern europe did not begin from the same starting point in each country while they all share a common economic legacy the traditional soviet type centrally planned economy some countries had been experimenting with limited forms of market oriented reform for one or two decades in particular hungary since 1968 and poland since 1981 82 had been flirting with a market oriented system for years with programs aimed at achieving an efficient coexistence of plan and market this paper will first examine the thinking behind the early attempts to combine plan and market it will then outline some of the key elements of the limited market oriented reforms undertaken in hungary and poland in the 1980s finally it will suggest some of the important lessons from this experience

job duration seniority and earnings an important stylized fact about labor markets is that workers with longer seniority with their current employer have higher earnings than other workers with the same total labor market experience this study shows that workers in longer jobs earn more throughout than workers in a series of shorter jobs and that the measured positive cross sectional return seniority is largely a statistical artifact due to the correlation of seniority with an omitted variable representing the quality of the worker the job or the worker employer match the implication is tha t earnings do not in fact rise very much with seniority copyright 1987 by american economic association

aging growth and the allocation of public expenditures on health and education in this paper i develop an overlapping generations endogenous growth model in which both public education and health are sources of growth by affecting the accumulation rate of the human capital stock and the savings rate over life expectancy i first find that dynamic complementarities of public expenditures lead to minimum threshold levels of public education and health expenditures that ensure sustainable growth i then show how governments can use the allocation of public expenditures as an alternative policy instrument to maximize growth without increasing the tax rate or the retirement age as usually happens in aging economies resume vieillissement croissance et l allocation des depenses publiques en sante et en education dans ce texte l auteur developpe un modele de croissance endogene avec des generations qui se chevauchent dans lequel les services publics en sante et en education sont des sources de croissance en raison du fait qu ils affectent le taux d accumulation du stock de capital humain et le taux d epargne au cours du cycle de vie on decouvre que les complementarites dynamiques des depenses publiques determinent des seuils minimaux de depenses publiques en sante et en education qui assurent une croissance durable on montre comment les gouvernements peuvent utiliser l allocation des depenses publiques comme un instrument de politique publique de rechange pour maximiser la croissance sans accroitre le taux d imposition ou l ge de la retraite comme cela se fait d habitude dans les economies vieillissantes

demographic change human capital accumulation and r d based growth employing an overlapping generations model of r d based growth with endogenous fertility and education decisions we examine how demographic changes induced by an increase in life expectancy influence the long run growth rate of the economy we demonstrate that life expectancy when relatively low high positively negatively affects economic growth this paper also compares the growth implications of child education subsidy policies i e policies for enhancing basic education and child rearing subsidy policies i e pro natal policies and demonstrate that while the child education subsidies consistently foster economic growth child rearing subsidies may negatively affect economic growth

vintage capital investment and growth abstract we study the dynamics of growth and investment in a continuous time model with vintage capital vintage capital models may be characterized by non exponential rates of depreciation and technical change and can incorporate gestation lags as well as learning by using we investigate the effect of such features on the dynamics of investment and growth and show how they can contribute to explaining the volatile nature of investment time series

demand changes and real exchange rate dynamics in a finite horizon model with sectoral adjustment costs author affiliation hung ju chen department of economics national taiwan university 21 hsu chow road taipei 100 taiwan e mail hjc ntu edu tw corresponding author chen min hsu department of economics national taiwan university 21 hsu chow road taipei 100 taiwan e mail chenmin ntu edu tw acknowledgment we would like to acknowledge the financial support provided by the program for globalization studies at the institute for advanced studies in humanities national taiwan university grant 95r0064 ah03 03 we wish to express our sincere appreciation for helpful comments and suggestions provided by two anonymous referees the editor of the journal joshua aizenman been lon chen ming chia li tsunao okumura and elias sanidas as well as participants at the 2007 annual conference of the asia pacific economic association and the 2007 conference of korea and the world economy we also thank ke shaw lian for his assistance any errors within the work are our responsibility 1 introductionalthough the traditional macroeconomic models tend to explain economic fluctuations by focusing solely on supply shocks given that equilibrium is determined by both demand and supply it would seem obvious that changes in demand may also have important effects in terms of their contribution to economic oscillations changes in demand can easily occur particularly for those small open economies for example small open economies can be easily disturbed by external shocks such as terms of trade shocks through international trade 1 another example is the reduction in the mortality rate as a result of higher health investment both public and private and better healthcare during the economic development 2 for export orientated growth economies in particular such as those of hong kong and taiwan changes in either the terms of trade or the mortality rate can significantly influence economic performance impacting the real exchange rate investment output savings and the current account the phenomenon that life expectancy is steadily lengthening for most developing countries has led to the emergence of a growing number of studies on the impact of population aging 3 since an increase in life expectancy will change the expectation of lifetime utility it will directly affect households inter temporal decisions with regard to consumption and savings however previous studies tend to analyze the impact of mortality decline in a closed economy or in a small open economy with exogenous and constant factor prices 4in order to study the impact of mortality rate changes on the economic performance in an open economy we use the overlapping generations model with uncertain lifetime developed by yaari 1965 and blanchard 1985 to examine household savings behavior within this model agents live with a finite lifetime such that different types of agents simultaneously live in the economy 5 furthermore we extend the blanchard type model to a three good open economy composed of exportable importable and non traded goods to allow us to consider the dynamics of the real exchange rate when demand changes capital production and accumulation are also incorporated into the framework to facilitate an examination of the investment behavior of firms we assume that the economy uses both capital and labor to produce exportable goods and non traded goods while importable goods are imported from abroad capital is produced by the non traded sector and installation costs are incurred when capital is transported to the exportable sector 6 as indicated by morshed and turnovsky 2004 the inclusion of the sectoral adjustment costs of capital can generate persistent deviations from the long run equilibrium by the real exchange rate in response to demand changes 7 because the real exchange rate is playing a dual role of a non traded goods price and a capital price we are able to study the impact of population aging and terms of trade shocks on international capital flows in a small open economy with endogenous factor prices

replacement echoes in the vintage capital growth model this paper is concerned with a non standard source of fluctuations called echo effects i e the ability of an economy to reproduce its own past history in the 1960s growth theorists believed that this property could arise in vintage capital models taking the form of replacement echoes this line of research was stopped after the publication of solow et al 15 who showed that echoes should vanish in a solow growth model with vintage capital however the fundamental reason for this result has nothing to do with vintages rather it comes directly from the main assumption in a solow growth model i e at equilibrium investment is a constant fraction of output and does not depend on any optimal replacement rule we claim that in a more general ramsey model replacement echoes do not necessarily vanish and we show this in the case when instantaneous utility is linear c 1997 academic press

life expectancy schooling time retirement and growth i analyze how changes in life expectancy affect retirement age education time and growth rates of economies i set up a continuous time overlapping generations model of endogenous growth with externalities in human capital production i find that increases in life expectancy give rise to first higher retirement ages and second higher education spans a threshold level for life expectancy exists such that per capita growth rates follow an inverted u pattern i introduction in this article i analyze how changes in life expectancy may affect optimal education time retirement age and the growth rates of economies to this end i set up a continuous time overlapping generations growth model with human capital accumulation that i solve numerically the issue of the effects of the reduction in mortality rates and the resulting increases in life expectancy on economic growth rates has been recently addressed in the literature through both empirical and theoretical studies along these lines i focus on human capital acquisition and its transmission across generations as the force driving the growth rate concerning empirical studies the hypothesis that the reduction in mortality rates has caused higher levels of investment in human capital and therefore augmented growth rates is partially supported for various economies thus kalemli ozcan et al 2000 show an increase in life expectancy at birth along with an increase in average numbers of years of schooling in england they claim that after averaging across lower income countries there is apparently a connection between increases in life expectancy at birth and increases in gross secondary school enrollment that is positively connected with higher growth rates observed preliminary data from latin american and caribbean countries show that gross domestic product gdp growth is statistically associated with life expectancy for instance estimates based on data from mexico suggest that for any additional year of life expectancy there will be an additional 1 increase in gdp 15 years later see world health organization 1999 box 1 2 9 along the same lines rodriguez and sachs 1999 also find a positive effect of life expectancy on gdp growth for the case of venezuela barro and sala i martin 1995 estimate for a sample of 97 countries that a 13 year increment in life expectancy would increase the per capita growth rate by 1 4 per year they also find however some exceptions where increments in life expectancy have not resulted in higher growth even though all of them exhibited higher schooling levels in the period 1960 85 malmberg 1994 gives another exception higher growth was achieved when middle aged persons were numerous whereas increases in dependent age groups led to lower per capita growth in sweden finally some other studies find mixed evidence so that increments in life expectancy result in higher growth rates for low levels of life expectancy but in lower growth rates for high levels of life expectancy see zhang et al 2003 and references therein a common result in most theoretical studies that include some sort of human capital is that an increase in life expectancy lengthens the period needed to recover investment in human capital which translates into higher returns to individual education or human capital investment this augmented return will give rise to higher levels of investment in human capital which in turn will raise growth rates ehrlich and lui 1991 show in a three overlapping generations model how improvements in longevity lower fertility thus raising educational investment and long term growth meltzer 1995 finds that mortality reductions may favor economic growth by increasing educational investment kalemli ozcan et al 2000 show in an overlapping generations model a la blanchard that if mortality drops life expectancy increases so that an augmented life horizon to enjoy the return to human capital investment gives rise to higher schooling human capital investment although growth is not affected because the growth rate in their model is identically equal to zero

the child is father of the man implications for the demographic transition we propose a new theory of the demographic transition based on the evidence from natural sciences that physical development during childhood affects adult life expectancy positively this theory is embodied in a continuous time olg framework where fertility longevity and education all result from individual decisions we conclude that a sustained improvement in physical development is at the basis of the observed demographic transition in today s developed countries and may be an important factor in explaining the slow transition from the malthusian towards the modern era the dynamics of the proposed model reproduce the key features of the demographic transition including sustained improvements in child physical development permanent increase in life expectancy a hump shaped evolution of both population growth and fertility and late increases in secondary educational attainments

intergenerational trade longevity and economic growth we develop an overlapping generations model of endogenous growth in which human capital is the engine of growth and the generations are linked through material and emotional interdependencies within the family parents invest in their children to achieve both old age support care and emotional gratification and material support from children is determined through self enforcing implicit contracts we show that optimal intergenerational trade can then lead to maximization of growth opportunities our model produces a theory of the demographic transition linking longevity fertility and economic growth we also show that while population aging may raise the growth rate an increase in young age longevity is likely to produce a greater increase in the growth rate and a reduction in the fertility rate in a growth equilibrium these predictions and the model s implications concerning the behavior of private savings during the takeoff period appear consistent with empirical evidence

hungary in transition to a market economy hungary began its transition to a market economy as long ago as 1968 with the adoption of the new economic mechanism when detailed central planning was abandoned and the economy was regulated by means of financial and economic levers hare radice and swain 1981 however after a period of re centralization in the 1970s and further marketoriented reforms during the 1980s it became evident that the country was still far from achieving a successful transition nevertheless hungary s attempts at economic reform over the last 20 years are remarkably instructive both for the present government s program of transition and for other eastern european nations for some general discussion of reform attempts and approaches see hare 1987 moreover many of the measures now being implemented in hungary were prepared and in many cases began to be implemented prior to the country s political transformation hence there is much stronger continuity in the hungarian reforms than one can find elsewhere in the region

education lifetime labor supply and longevity improvements this paper presents an analysis of the differential role of mortality for the optimal schooling and retirement age when the accumulation of human capital follows the so called ben porath mechanism we set up a life cycle model of consumption and labor supply at the extensive margin that allows for endogenous human capital formation this paper makes two important contributions first we provide the conditions under which a decrease in mortality leads to a longer education period and an earlier retirement age second those conditions are decomposed into a ben porath mechanism and a lifetime human wealth effect vs the years to consume effect finally using us and swedish data for cohorts born between 1890 and 2000 we show that our model can match the empirical evidence

economic reform and dynamic political constraints in this paper we examine the impact of political constraints on economic reform plans with special reference to the transition from centrally planned to market economies we analyse the problem of an agenda setting reform minded government facing a bureaucracy or industrial sector for which allocative efficiency requires redundancies and an increase in work intensity the government also tries to minimize the rents conceded to its heterogeneous workforce we examine two types of political constraints unanimity rule and majority rule both in a one period and a two period horizon the main results are the following first of all we show how adverse selection and time consistency may generate the widely observed feature of gradualism as an ingredient of an optimal reform second under a majority rule it is shown to be possible for the government to obtain a majority vote for a reform scheme that intertemporally hurts majority interests indeed the government can improve rent extraction through the strategic use of the threat of future proposals the group which expects to be in the minority tomorrow may accept concessions while its votes can be used to extract rents from another group these results suggest that in a dynamic context democratic constraints should not be overestimated as an obstacle against efficiency enhancing economic reforms the results of this paper may throw some light on the political economy of current reforms in eastern europe governments and political decision makers in general always face political constraints when elaborating reform proposals they know that the need to overcome potential opposition from various groups of the population constrains proposals for change political constraints vary depending on the specific institutional structure of society and are clearly different under a military dictatorship than under a parliamentary democracy the role of political constraints seems particularly important in eastern europe today where new democratic governments face the huge task of achieving the transition to a market economy while the introduction of democracy may have removed some important obstacles to economic change namely the veto power of a powerful nomenclatura under communist one party rule fears are expressed that it could potentially jeopardize economic reforms which may during the transition period hurt a majority of the population what can economic theory tell us about optimal economic reform under political constraints this paper starts addressing this ambitious question by looking at structural reform focusing on a restructuring of economic sectors which requires massive redundancies and a significant rise in labour productivity our model illustrates the case of planning

life expectancy and endogenous growth we consider an overlapping generations model with uncertain lifetime and endogenous growth individuals have to choose the length of time devoted to schooling before starting to work we show that it depends positively on life expectancy but that the positive effect of a longer life on growth could be offset by a decrease in the participation rate dynamics are characterized by a delay differential equation and human capital converges with oscillations to a balanced growth path

recent evolutionary theorizing about economic change this famous passage from marshall s principles of economics it first appeared in the fifth edition which came out in 1907 nicely brings out two issues which are as germane to economics today as they were when marshall wrote the first is the heavy reliance by economists in their formal theorizing on the notion of equilibrium the other is the appeal that biological conceptions3x201d have for many economists particularly when their focus is on economic change

editorial reforming the welfare state in postsocialist societies abstract the communist system led to a premature welfare state with universal entitlements out of all proportion to the country s resources and the fiscal capacity of the state many citizens suffer heavy losses when the proportions are restored great progress has been made with the postsocialist transformation in several fields but reform of the welfare sector has lagged behind dominant state ownership bureaucratic centralization and a lack of competition remain there are a number of obstacles in the path of reform citizens are unclear about the tax burden imposed by state welfare services damage can be done by populist politicians who make irresponsible promises to raise welfare spending while concurrently cutting taxation economists have a duty to make a sober appraisal of the situation and present realistic alternatives

longevity and lifetime labor supply evidence and implications conventional wisdom suggests that increased life expectancy had a key role in causing a rise in investment in human capital i incorporate the retirement decision into a version of ben porath s 1967 model and find that a necessary condition for this causal relationship to hold is that increased life expectancy will also increase lifetime labor supply i then show that this condition does not hold for american men born between 1840 and 1970 and for the american population born between 1890 and 1970 the data suggest similar patterns in western europe i end by discussing the implications of my findings for the debate on the fundamental causes of long run growth

legality and market reform in soviet type economies the classical soviet type system operates in the virtual absence of economic legality which is a prerequisite to a successful transition to a market economy in the soviet union and the nations of eastern europe in the absence of economic legality the leadership of these countries will not be able to implement a credible commitment to private property rights or any other effective market incentive mechanism in addition they will be unable to promote the growth of multilateral impersonal trade without legality a shift away from central planning toward market allocation may very likely lead to economic decline inflationary pressures and a polarization in income distribution which in turn could unleash political reaction against the reform process in general

fiscal policy in an endogenous growth model in a neoclassical growth model it is possible to make a case for public debt because a balanced growth path may be dynamically inefficient this paper shows that this possibility no longer holds in an endogenous growth model with constant external returns to capital it is shown that an increase in public debt reduces the growth rate so there always exists a future generation that will be harmed and that a reduction in public debt although it increases the growth rate cannot be pareto improving one current generation must be harmed

life expectancy human capital social security and growth we analyze the effects of changes in the mortality rate upon life expectancy education retirement age human capital and growth in the presence of social security we build a vintage growth overlapping generations model in which individuals choose the length of education and the age of retirement and where unfunded social security pensions depend on workers past contributions social security has a positive effect on education but pension benefits favor reductions in retirement age the net effect is that starting from a benchmark case higher life expectancies give rise to lower per capita gdp growth in the presence of social security as the share of the active population is reduced in addition higher social security contribution rates reduce the growth rate of per capita gdp

optimal social security in a dynastic model with human capital externalities fertility and endogenous growth abstract in this paper we investigate the optimal scale of pay as you go social security in a dynastic family model with human capital externalities fertility and endogenous growth human capital externalities reduce the return to human capital investment and hence lead to under investment in human capital and over reproduction of the population if the taste for the number of children is sufficiently weak relative to the taste for the welfare of children social security can be welfare enhancing by reducing fertility and raising human capital investment per child