Intergenerational earnings mobility and demographic dynamics: Welfare analysis of an aging Japan

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Abstract

This paper simulates the effects of intergenerational earnings mobility on individual welfare and future demography in an aging and depopulating Japan. A simulation analysis finds that increased intergenerational mobility across income classes promotes economic growth, and from a long-term perspective, a higher mobility potentially achieves Pareto improvements. In the long run, however, it will hinder economic growth. This is because increased mobility increases the population share of individuals with a higher labor productivity, enhancing economic growth in the initial stage, but because of their lower fertility, an increase in their population ratio negatively effects the total population over time.

Original languageEnglish
Pages (from-to)76-104
Number of pages29
JournalEconomic Analysis and Policy
Volume74
DOIs
Publication statusPublished - Jun 2022

Keywords

  • Demographic dynamics
  • Depopulating and aging societies
  • Intergenerational earnings mobility
  • Pareto improvements
  • Welfare analysis

ASJC Scopus subject areas

  • Economics and Econometrics
  • Economics, Econometrics and Finance (miscellaneous)

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