Implications of Increasing College Attainment for Aging in General Equilibrium / Juan Carlos Conesa, Timothy J. Kehoe, Vegard M. Nygaard, Gajendran Raveendranathan.

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Conesa, Juan Carlos

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w26000.Publication details: Cambridge, Mass. National Bureau of Economic Research 2019.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: 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.

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Holdings
Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w26000 (Browse shelf(Opens below))	Not For Loan

Total holds: 0

June 2019.

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.