Automation, stagnation, and the implications of a robot tax

We assess the long-run growth effects of automation in the overlapping generations framework. Although automation implies constant returns to capital and, thus, an AK production side of the economy, positive long-run growth does not emerge. The reason is that automation suppresses wage income, which is the only source of investment in the overlapping generations model. Our result stands in sharp contrast to the representative agent setting with automation, where sustained long-run growth is possible even without technological progress. Our analysis therefore provides a cautionary tale that the underlying modeling structure of saving/investment decisions matters for the derived economic impact of automation. In addition, we show that a robot tax has the potential to raise per capita output and welfare at the steady state. However, it cannot induce a takeoff toward positive long-run growth.info:eu-repo/semantics/acceptedVersio

Rising Longevity, Increasing the Retirement Age, and the Consequences for Knowledge‐based Long‐run Growth

We assess the long-run growth effects of rising longevity and increasing the retirement age when growth is driven by purposeful research and development. In contrast to economies in which growth depends on learning-by-doing spillovers, raising the retirement age fosters economic growth. How economic growth changes in response to rising life expectancy depends on the retirement response. Employing numerical analysis, we find that the requirement for experiencing a growth stimulus from rising longevity is fulfilled by the USA, nearly met by the average OECD economy, but missed by the European Union and by Japan

Revisiting the Lucas model

We revisit the influential economic growth by Lucas(1988) ["On the mechanics of economic development." Journal of Monetary Econmomics, 22(1):3-42], assuming that households optimally allocate consumption and education over the life-cycle given an exogenous interst rate and exogenous wages. We show that in such a partial equilibrium setting, the original two-state (physical capital and human capital) optimization problem can be decomposed into two single-state optimal control models. This transformation allows us to rigorously prove the existence of a singular control describing the allocation of education time along a balanced growth path. We derive a constructive condition for a singular control to exist and show that under this condition definitely many singular controls are optimal in the individual household problem. In contrast to the original general equilibrium framework in which an agent always chooses part-time education and part-time work, in our framework such an agent might find it optimal tp allocate her whole available time to education at the beginning of her life and to focus on labor supply only when she is older

Fertility in High-Income Countries: Trends, Patterns, Determinants, and Consequences

High-income countries have generally experienced falling fertility in recent decades. In most of these countries, the total fertility rate is now below the level that implies a stable population in the long run. This has led to concerns among economists, policymakers, and the wider public about the economic consequences of low fertility and population decline. In this contribution, we aim to i) describe the main determinants of low fertility in high-income countries, ii) assess its potential economic consequences, iii) discuss adjustment mechanisms for individuals and economies, iv) propose a simple economic framework to analyze the long-run economic impact of low fertility, and v) draw lessons for economic policymakers to react appropriately. While the economic challenges of low fertility are substantial, a thoughtful and consistent policy response can mitigate most of the adverse consequences

Medical Innovation, Life Expectancy, and Economic Growth

Despite the increasing recognition of the importance of health for economic growth, the role of medical innovation in this process remains largely unexplored. Specifically, what are the causal effects of medical innovation on economic growth, and what shape does this relationship take? To address these questions, we propose an R&D-based economic growth model with overlapping generations, wherein life expectancy depends on healthcare utilization and medical innovation, and we then empirically test the model’s implications. Our findings reveal a clear causal pathway from medical innovation to economic growth, with increasing life expectancy serving as a key transmission channel. In the early stages of development, medical innovation does not have a positive effect on economic growth, whereas in intermediate stages, a positive and significant effect emerges. In late stages of development, where life expectancy is already very high, the effect becomes weaker and potentially negative because health improvements are increasingly difficult to achieve and become more resource-intensive

Does human capital compensate for population decline?

Fertility rates have been falling persistently over the past 50 years in most rich countries. Simultaneously, the trend of outward migration from poorer to richer countries has been steady. These two forces contributed to population aging, and – in an increasing number of countries – even to population decline. In this paper, we quantify the effect of decreasing fertility on the aggregate human capital stock. In doing so we take into account that parents with fewer children may raise investments in their children's education and health. We find that the human capital impact of declining fertility is partly compensated through such responses when including the full set of countries in our regressions. For the subset of countries that experience population decline, the compensatory effect is weaker and, in many specifications, even insignificant

Macro-level efficiency of health expenditure: Estimates for 15 major economies

The coronavirus disease 2019 (COVID-19) pandemic highlights the importance of strong and resilient health systems. Yet how much a society should spend on healthcare is difficult to determine because additional health expenditures imply lower expenditures on other types of consumption. Furthermore, the welfare-maximizing (“efficient”) aggregate amount and composition of health expenditures depend on efficiency concepts at three levels that often get blurred in the debate. While the understanding of efficiency is good at the micro- and meso-levels—that is, relating to minimal spending for a given bundle of treatments and to the optimal mix of different treatments, respectively—this understanding rarely links to the efficiency of aggregate health expenditure at the macroeconomic level. While micro- and meso-efficiency are necessary for macro-efficiency, they are not sufficient. We propose a novel framework of a macro-efficiency score to assess welfare-maximizing aggregate health expenditure. This allows us to assess the extent to which selected major economies underspend or overspend on health relative to their gross domestic products per capita. We find that all economies under consideration underspend on healthcare with the exception of the United States. Underspending is particularly severe in China, India, and the Russian Federation. Our study emphasizes that the major and urgent issue in many countries is underspending on health at the macroeconomic level, rather than containing costs at the microeconomic level

Climate and the spread of COVID-19

Visual inspection of world maps shows that coronavirus disease 2019 (COVID-19) is less prevalent in countries closer to the equator, where heat and humidity tend to be higher. Scientists disagree how to interpret this observation because the relationship between COVID-19 and climatic conditions may be confounded by many factors. We regress the logarithm of confirmed COVID-19 cases per million inhabitants in a country against the country's distance from the equator, controlling for key confounding factors: air travel, vehicle concentration, urbanization, COVID-19 testing intensity, cell phone usage, income, old-age dependency ratio, and health expenditure. A one-degree increase in absolute latitude is associated with a 4.3% increase in cases per million inhabitants as of January 9, 2021 (p value < 0.001). Our results imply that a country, which is located 1000 km closer to the equator, could expect 33% fewer cases per million inhabitants. Since the change in Earth's angle towards the sun between equinox and solstice is about 23.5°, one could expect a difference in cases per million inhabitants of 64% between two hypothetical countries whose climates differ to a similar extent as two adjacent seasons. According to our results, countries are expected to see a decline in new COVID-19 cases during summer and a resurgence during winter. However, our results do not imply that the disease will vanish during summer or will not affect countries close to the equator. Rather, the higher temperatures and more intense UV radiation in summer are likely to support public health measures to contain SARS-CoV-2

The global economic burden of chronic obstructive pulmonary disease for 204 countries and territories in 2020–50: a health-augmented macroeconomic modelling study

Background: Chronic obstructive pulmonary disease (COPD) is the third leading cause of death worldwide and imposes a substantial economic burden. Gaining a thorough understanding of the economic implications of COPD is an important prerequisite for sound, evidence-based policy making. We aimed to estimate the macroeconomic burden of COPD for each country and establish its distribution across world regions. Methods: In this health-augmented macroeconomic modelling study we estimated the macroeconomic burden of COPD for 204 countries and territories over the period 2020-50. The model accounted for (1) the effect of COPD mortality and morbidity on labour supply, (2) age and sex specific differences in education and work experience among those affected by COPD, and (3) the impact of COPD treatment costs on physical capital accumulation. We obtained data from various public sources including the Global Burden of Disease Study 2019, the World Bank database, and the literature. The macroeconomic burden of COPD was assessed by comparing gross domestic product (GDP) between a scenario projecting disease prevalence based on current estimates and a counterfactual scenario with zero COPD prevalence from 2020 to 2050. Findings: Our findings suggest that COPD will cost the world economy INT$4·326 trillion (uncertainty interval 3·327-5·516; at constant 2017 prices) in 2020-50. This economic effect is equivalent to a yearly tax of 0·111$1·363 trillion (uncertainty interval 1·034-1·801) and INT$1·037 trillion (0·868-1·175), respectively. Interpretation: The macroeconomic burden of COPD is large and unequally distributed across countries, world regions, and income levels. Our study stresses the urgent need to invest in global efforts to curb the health and economic burdens of COPD. Investments in effective interventions against COPD do not represent a burden but could instead provide substantial economic returns in the foreseeable future